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2023 (9) TMI 1589 - 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 under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) for hostel accommodation. 2. Requirement for GST registration based on turnover. 3. Applicable GST tariff heading and rate for hostel accommodation services. 4. Taxability of in-house food supply as part of a composite supply. 5. Scope of 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 exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate), which exempts "services by way of renting of residential dwelling for use as residence." The judgment highlighted that the term "residential dwelling" is not defined in the CGST Act, but traditionally refers to a place used as a home. Hostels, providing temporary lodging, do not fit this definition. The ruling emphasized that the hostel's nature as a commercial establishment, providing accommodation and ancillary services for a fee, does not qualify as "residential dwelling for use as residence." Thus, the Applicant's services are not eligible for the exemption. 2. Requirement for GST Registration: The judgment clarified that since the Applicant's services do not qualify for exemption, they must register for GST if their annual turnover exceeds twenty lakh rupees, as per Section 22 of the GST Acts. The provision mandates registration for suppliers of taxable services exceeding the specified turnover threshold. 3. Applicable GST Tariff Heading and Rate: The ruling determined that the hostel accommodation services fall under Tariff heading 9963, which covers "Accommodation, food and beverage services." The applicable GST rate is 9% CGST + 9% SGST, totaling 18%, under Sl.No. 7(vi) of Notification No. 11/2017, as amended. The judgment distinguished hostel services from hotel accommodations, noting the longer duration and basic facilities typical of hostels. 4. Taxability of In-house Food Supply: The judgment addressed whether the supply of in-house food to hostel inmates constitutes a composite supply. It concluded that the Applicant provides a composite supply, where the principal service is hostel accommodation, which is taxable at 18%. The provision of food and other services is considered ancillary to the main service, thus attracting the same tax rate as the principal supply. 5. Scope of Ruling under Section 97(2): The judgment noted that the fifth question posed by the Applicant did not fall within the scope of Section 97(2) of the GST Act, which outlines the matters on which advance rulings can be sought. Consequently, no ruling was issued for this question. Ruling: The judgment concluded that the Applicant's hostel accommodation services are not exempt under the specified GST notifications. The Applicant must register for GST if their turnover exceeds the threshold, and the services are taxable at 18%. The supply of in-house food is part of a composite supply, attracting the same tax rate. No ruling was provided for the fifth question as it was outside the scope of Section 97(2).
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