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2023 (9) TMI 1590 - 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 services. 2. Requirement for GST registration. 3. Tariff heading and tax rate for hostel accommodation services. 4. Taxability of in-house food supply as a composite service. 5. Admissibility of certain questions under Section 97(2) of the GST Act. Detailed Analysis: 1. Eligibility for GST Exemption on Hostel Accommodation Services: 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) dated 28.06.2017. The notification exempts services by way of renting residential dwellings for use as residence. However, the term "residential dwelling" is not defined in the CGST Act. The judgment noted that in trade parlance, a residential dwelling is a home, not including temporary accommodations like hostels. The applicant's hostel, providing accommodation to students and working women, was deemed more akin to a commercial establishment rather than a residential dwelling. The hostel's operation involved renting rooms on a per-bed basis with additional services, thus constituting a business activity. Consequently, the accommodation provided did not qualify as a residential dwelling, and the exemption was not applicable. 2. Requirement for GST Registration: Given that the hostel accommodation service does not qualify for exemption, the applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The service was deemed a "supply" under Section 7(1)(a) of the CGST Act, necessitating registration as per Section 22 of the GST Act. 3. Tariff Heading and Tax Rate for Hostel Accommodation Services: The services provided by the applicant fall under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The applicable tax rate is 9% CGST and 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended. This classification reflects the commercial nature of the hostel services, distinguishing them from residential accommodations. 4. Taxability of In-House Food Supply as a Composite Service: The applicant also provided in-house food services to hostel inmates, which were treated as part of a composite supply. According to Section 2(30) of the GST Act, a composite supply involves two or more services naturally bundled together, with one being the principal supply. In this case, hostel accommodation was the principal supply, and the tax rate for the composite supply was determined by the tax rate applicable to the principal supply, which is 18%. 5. Admissibility of Certain Questions Under Section 97(2) of the GST Act: 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 question. Ruling Summary: - The hostel accommodation services are not exempt from GST under the specified notifications. - The applicant must register for GST if their turnover exceeds the specified threshold. - The applicable tax rate for hostel accommodation services is 18% (9% CGST + 9% SGST). - In-house food supply is part of a composite supply with the principal supply being taxable at 18%. - No ruling was provided for the question outside the scope of Section 97(2).
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