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2023 (9) TMI 1584 - 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 Entry 12 of Exemption Notification No. 12/2017-CT (Rate). 2. Requirement for GST registration based on turnover. 3. Tariff heading and tax rate applicable to hostel accommodation services. 4. Tax implications on the supply of in-house food as part of hostel services. 5. Scope of the ruling under Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility for GST Exemption: The primary issue was whether the hostel accommodation provided by the applicant qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate), which pertains to "services by way of renting of residential dwelling for use as residence." The term "residential dwelling" is not defined under the CGST Act, but in trade parlance, it refers to a home or abode and excludes temporary accommodations like hotels or hostels. The judgment clarified that the applicant's hostel, which provides accommodation to students and working women, does not qualify as a "residential dwelling" because it is more akin to sociable or commercial accommodation. Additionally, the services provided, including food and housekeeping, indicate a business operation rather than mere residential renting. Consequently, the hostel services do not meet the criteria for exemption as they are not rented out for use as a residence. 2. Requirement for GST Registration: The judgment determined that since the applicant's services do not qualify for exemption, they are considered a taxable supply under Section 7(1)(a) of the CGST Act. Therefore, the applicant is required to register for GST if their annual turnover exceeds twenty lakh rupees, as stipulated by Section 22 of the GST Act. 3. Tariff Heading and Tax Rate: The services provided by the applicant fall under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The judgment found that hostel accommodation services are taxable at 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. This rate applies to the supply of hostel accommodation, distinguishing it from hotel services, which have different tax implications. 4. Tax Implications on In-house Food Supply: The judgment addressed the supply of in-house food as part of the hostel services. It was determined that the food supply is part of a composite supply, where the principal supply is the hostel accommodation service. According to Section 8 of the CGST Act, the tax rate applicable to the principal supply applies to the entire composite supply. Therefore, since the hostel accommodation is taxable at 18%, the same rate applies to the composite supply, including the in-house food service. 5. Scope of the Ruling: The fifth question raised by the applicant did not fall within the scope of Section 97(2) of the GST Act, and thus, no ruling was issued on that matter. The judgment strictly adhered to the specified questions within the permissible scope for advance ruling. Ruling: 1. The hostel accommodation services provided by the applicant are not eligible for GST exemption under the specified notifications. 2. The applicant must register for GST in Tamil Nadu if their turnover exceeds twenty lakh rupees. 3. The hostel accommodation services fall under Tariff heading 9963 and are taxable at 9% CGST + 9% SGST. 4. The supply of in-house food as part of the hostel services is a composite supply taxable at 18%. 5. No ruling was issued for the fifth question as it was outside the scope of Section 97(2) of the GST Act.
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