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2023 (9) TMI 1581 - AAR - GSTEligibility for GST exemption on hostel accommodation services - whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not? - HELD THAT - The term 'residential dwelling' has not been defined either under CGST Act or under Notification No. 12/2017. However, under the erstwhile service tax law, in paragraph 4.13.1 of the Taxation of Services An Education Guide dated 20.06.2012', issued by the CBIC, the expression residential dwelling' has been interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay. It is clear that the purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of 'renting of residential dwelling' for 'use as residence,' being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence. It is clear that hostel accommodation is not equivalent to residential accommodation and hence the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No.09/2017-IT(Rate) dated 28.06.2017, as amended. Requirement for GST registration based on turnover - HELD THAT - It is clear that the Applicant's service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is very much be required to take registration under the GST Enactments, as the arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2(b) of the Second Schedule to the CGST Act, the said transaction constitutes supply - the Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees. Taxability and applicable GST rate for hostel accommodation services - HELD THAT - It is observed that hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, the supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST 9% SGST under Sl. No. 7(vi) of the above Notification (Sl.No. 7 (ix) as per original notification). Tax treatment of in-house food supply as part of hostel services - HELD THAT - The natural bundle has the characteristic of where one service is the main service and the other services are ancillary services which help in better enjoyment of the main service. Further, there is a single price for the combined services. The principal activity of the Applicant is supply of accommodation Services. While providing such services, the charges are being realised in a consolidated manner for the value of food and other like services rendered. The Applicant has stated that they do not charge separately for the other services provided by them. Thus, the services provided by the Applicant are composite in nature - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. Since the Applicant provides a number of services in a composite manner, the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, will be tax rate for the composite supply provided by them.
Issues Involved:
1. Eligibility for GST exemption on hostel accommodation under specific notification entries. 2. Requirement for GST registration based on turnover. 3. Applicable GST rate and tariff heading for hostel accommodation services. 4. Tax treatment of in-house food supply as part of composite services. 5. Scope of questions eligible for advance ruling under Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility for GST Exemption on Hostel Accommodation: The primary question was whether the hostel accommodation provided by the applicant qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and similar entries under the TNGST and IT Acts. The ruling clarified that the term "residential dwelling" is not defined under the CGST Act, but generally refers to a home where people reside permanently. Hostels, providing temporary lodging, do not qualify as "residential dwellings" for use as residence. The ruling emphasized that hostels are commercial establishments providing sociable accommodation, not residential dwellings. Therefore, the exemption under the specified notification entries is not applicable to the applicant's services. 2. Requirement for GST Registration: The ruling stated that since the applicant's services do not qualify for exemption, they are considered a taxable supply under the GST Act. According to Section 22 of the GST Act, any supplier with an aggregate turnover exceeding twenty lakh rupees in a financial year must register for GST. Therefore, the applicant is required to register for GST if their turnover exceeds this threshold. 3. Applicable GST Rate and Tariff Heading: The supply of hostel accommodation services falls under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The applicable GST rate is 9% CGST plus 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 20/2019. The ruling differentiated hostel services from hotel accommodations, noting that hostels provide longer-term stays with basic facilities, unlike hotels. 4. Tax Treatment of In-house Food Supply: The ruling addressed whether the supply of in-house food to hostel inmates is exempt as part of a composite supply. It was determined that the applicant provides a composite supply of services, with hostel accommodation being the principal supply. As such, the tax rate applicable to the principal supply, which is 18%, applies to the entire composite supply, including food services. 5. Scope of Questions Eligible for Advance Ruling: The fifth question raised by the applicant was deemed outside the scope of Section 97(2) of the GST Act, and thus, no ruling was issued for it. This section outlines specific matters on which advance rulings can be sought, and the applicant's question did not fall within these parameters. Ruling: - The hostel accommodation services provided by the applicant are not eligible for GST exemption under the specified notification entries. - The applicant must register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. - The hostel accommodation services are taxable at 9% CGST and 9% SGST under the specified tariff heading. - The supply of in-house food is part of a composite supply, taxable at 18%, the rate applicable to the principal supply. - No ruling was issued for the fifth question as it was outside the scope of the advance ruling provisions.
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