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2023 (9) TMI 1591 - 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 for hostel accommodation services under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). 2. Requirement for GST registration based on turnover. 3. Applicable GST rate for hostel accommodation services. 4. Tax treatment for supply of in-house food to hostel inmates as a composite supply. 5. Admissibility of the fifth question under Section 97(2) of the GST Act. Issue-Wise Detailed Analysis: 1. Eligibility for GST Exemption for 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), which covers "services by way of renting of residential dwelling for use as residence." The judgment clarified that the term "residential dwelling" is not defined under the CGST Act, but under normal trade parlance, it refers to a place where people reside as a home, not including temporary accommodations like hostels. The Applicant's hostel, being a commercial establishment providing temporary lodging, does not qualify as a "residential dwelling." Therefore, the services supplied by the Applicant are not eligible for the said exemption. 2. Requirement for GST Registration: Since the Applicant's services do not qualify for exemption, they are required to register under GST if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the CGST Act, 2017. The judgment emphasized that the arrangement between the Applicant and the hostel occupants constitutes a "supply" under Section 7(1)(a) of the CGST Act, necessitating registration. 3. Applicable GST Rate for Hostel Accommodation Services: The judgment determined that the supply of hostel accommodation services falls under Tariff heading 9963 (Accommodation, food, and beverage services) and is taxable at 9% CGST + 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The decision differentiated hostel services from hotel accommodations, noting that hostels provide longer-term stays with basic facilities, unlike hotels. 4. Tax Treatment for Supply of In-House Food as a Composite Supply: The Applicant also provides in-house food and other services to hostel inmates for consolidated charges, which constitutes a composite supply. According to Section 8 of the CGST Act, 2017, the tax rate on the principal supply applies to the composite supply. Since the principal supply is the hostel accommodation service, taxable at 18%, this rate applies to the composite supply of accommodation and food services. 5. Admissibility of the Fifth Question: The judgment did not issue a ruling on the fifth question as it did not fall within the scope of Section 97(2) of the GST Act. Ruling Summary: - Hostel accommodation services are not exempt under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). - The Applicant must register for GST if turnover exceeds twenty lakh rupees. - Hostel accommodation services are taxable at 9% CGST + 9% SGST. - The composite supply of accommodation and food is taxable at 18%. - No ruling on the fifth question due to its inadmissibility under the GST Act.
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