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2023 (9) TMI 1587 - 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 of hostel accommodation for GST exemption under specific notifications. 2. Requirement for the applicant to register under GST. 3. Applicable GST rate and tariff heading for hostel accommodation services. 4. Taxability of in-house food supply as a composite supply. 5. Scope of advance ruling under Section 97(2) of the GST Act. Issue-Wise Detailed Analysis: 1. Eligibility of Hostel Accommodation 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) dated 28.06.2017 and similar notifications under the TNGST Act, 2017. The judgment clarified that the term "residential dwelling" has not been defined under the CGST Act or the notification, but in normal trade parlance, it refers to a place used as a home, excluding temporary accommodations like hotels or hostels. The applicant's hostel, being a commercial establishment providing temporary accommodation with ancillary services, does not qualify as a "residential dwelling for use as residence." Therefore, the services provided by the applicant do not fall under the exemption and are taxable. 2. Requirement for GST Registration: Since the hostel accommodation services provided by the applicant do not qualify for exemption, the applicant is required to register under GST if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the GST Acts. The arrangement between the applicant and the hostel occupants is considered a transaction in the course of furtherance of business, constituting "supply" under Section 7(1)(a) of the CGST Act, 2017. 3. Applicable GST Rate and Tariff Heading: The applicable GST rate and tariff heading for the hostel accommodation services were determined under Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended. The services fall under Tariff heading 9963 (Accommodation, food and beverage services) and are taxable at 9% CGST + 9% SGST under Sl. No. 7(vi) of the notification. Hostel services, which are for longer stays with basic facilities, cannot be equated to hotel accommodations, which are for temporary stays with extensive facilities. 4. Taxability of In-House Food Supply as a Composite Supply: The supply of in-house food to the hostel inmates was considered part of a composite supply, where the principal supply is the hostel accommodation services. As per Section 8 of the CGST Act, 2017, the tax rate on the principal supply applies to the composite supply. Therefore, the entire composite supply, including food services, is taxable at the rate applicable to the hostel accommodation services, which is 18%. 5. Scope of Advance Ruling under Section 97(2): The fifth question raised by the applicant was not addressed with a ruling, as it did not fall under the scope of Section 97(2) of the GST Act. The application was admissible only for questions falling within the specified scope of Section 97(2)(a), (b), and (f) of the CGST/TNGST Act, 2017. Ruling Summary: - The hostel accommodation services are not eligible for GST exemption under the specified notifications. - The applicant must register for GST if their turnover exceeds the threshold. - The services are taxable at 18% under the specified tariff heading. - The supply of in-house food is part of a composite supply and taxed at 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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