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2023 (9) TMI 1593 - 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 Entry 12 of Exemption Notification No. 12/2017-CT (Rate). 2. Requirement for GST registration based on turnover. 3. Applicable GST rate and tariff heading for hostel accommodation services. 4. Tax treatment of in-house food supply as part of hostel services. 5. Scope of ruling under Section 97(2) of the GST Act. Issue-wise Detailed Analysis: 1. Eligibility of Hostel Accommodation for GST Exemption: The primary question was whether the hostel accommodation provided by the applicant qualifies for 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 judgment highlighted that the term "residential dwelling" is not defined in the GST Act, but based on trade parlance and previous service tax guidelines, it refers to accommodation that does not include temporary lodging like hotels or hostels. The judgment concluded that the applicant's hostel does not qualify as a "residential dwelling" because it provides temporary accommodation similar to hotels, with services like food and housekeeping, which are not typical of residential dwellings. Therefore, the hostel services are not eligible for GST exemption under the specified entry. 2. Requirement for GST Registration: The applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the GST Act. The judgment noted that the applicant's services constitute a "supply" under the GST Act, and since they do not qualify for exemption, they must comply with registration requirements if their turnover threshold is met. 3. Applicable GST Rate and Tariff Heading: The judgment determined that the supply of hostel accommodation services falls under Tariff heading 9963, which pertains to "Accommodation, food and beverage services." The applicable GST rate is 9% CGST and 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment clarified that hostel services, being distinct from hotel accommodation, are taxed under this specific rate. 4. Tax Treatment of In-House Food Supply: The judgment addressed the composite nature of the services provided by the applicant, which include accommodation and in-house food supply. It was determined that these services are naturally bundled, with accommodation being the principal supply. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply (hostel accommodation) applies to the entire composite supply. Therefore, the composite service, including food, is taxed at the rate applicable to hostel accommodation, which is 18%. 5. Scope of Ruling Under Section 97(2) of the GST Act: The judgment did not issue a ruling on the fifth question posed by the applicant, as it did not fall within the scope of Section 97(2) of the GST Act. This section outlines specific questions on which advance rulings can be sought, and the applicant's query did not align with these criteria. Ruling: - The hostel accommodation services provided by the applicant are not eligible for GST exemption under the specified notification entries. - The applicant must register for GST if their turnover exceeds the prescribed threshold. - Hostel accommodation services are taxable at 9% CGST and 9% SGST under the relevant tariff heading. - The supply of in-house food as part of hostel services is a composite supply, taxable at 18%. - No ruling was issued for the fifth question as it was outside the scope of Section 97(2).
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