2024 (3) TMI 1271 - HC - GST

Exemption from GST - hostel and residential accommodation extended by the the Applicant hostel - specific tariff entry is applicable to hostels under the Tariff Notification, in the event of requirement of registration - in the event of the hostel accommodation being an exempt activity, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt being in the nature of a composite exempt supply or not - applicability of decision in the case of Taghar Vasudeva Ambrish -vs- Appellate Authority for Advanced Ruling, Karnataka 2022 (2) TMI 780 - KARNATAKA HIGH COURT - Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 dated 28.06.2017. HELD THAT - In the present case, it is not in dispute that the inmates of the respective hostels run by the petitioners are the girl students and the working women who are not registered persons and using the premises as their residence, for which, they are paying fee, which can be termed as rent and it is not the case of the respondents that the inmates are carrying on any commercial activities in the rented premises or using the same for commercial purpose. That apart, the inmates of the room also using the common kitchen and sharing the foods as their own. Admittedly, GST is not applicable if a residential property is rented out to any persons in their personal capacity and for use as their own residence. The hostel rooms are the residential dwelling units for the girl student and working women, etc. The residential dwelling varies from person to person. As far as the homeless people are concerned, the residential dwelling will be wherever they are residing such as public roads, streets or in any other places and except the same, no other places can be provided, unless and otherwise if the Government has accommodated those people in a home, where they are maintaining the same for homeless. Therefore, when for the homeless persons, the residential dwelling will be the places wherever they are residing, where, even they do not have cooking, washing and toilet, etc., facilities by itself it does not mean that their place is not a residential dwelling - Merely because the persons are staying in hostel rooms due to their financial condition, the same will not take away the status of the said hostel room as residential dwelling for the inmates of the room, because after their avocation, they have been staying, sleeping, eating, washing, etc in the hostel rooms alone. This Court is of the considered view that the 'hostel services' provided by the petitioners to the girl students and working women will squarely amount to the 'residential dwelling' and accordingly, the same will be squarely covered under the Entry No.12 of Exemption Notification No.12 of 2017. The Hon'ble Supreme Court, in the case of Collector of Central Excise v. Parle Exports (P) Ltd., 1988 (11) TMI 108 - SUPREME COURT has suggested that in interpreting the scope of any notification, the authority has first to keep in mind the object and purpose of the notification and all parts of it should be read harmoniously in aid of, and not in derogation, of that purpose. In the present case, the imposition of GST on the Hostel accommodation should be viewed from the perspective of the recipient of service and not from the perspective of service provider. However, the 2nd respondent has dealt with the entire issue as if GST is going to be imposed on the revenue of the service provider and he is going to pay the same from and out of his pocket - the imposition of GST is only on the recipient of service and the GST is going to be collected only from the recipient of the service and not from the service provider. As far as service provider is concerned, he is collecting the GST from the recipient of the service and making deposit with the Central Government. Imposition of GST on hostel accommodation - HELD THAT - In order to claim exemption of GST, the nature of the end-use should be 'residential' and it cannot be decided by the nature of the property or the nature of the business of the service provider, but by the purpose for which it is used i.e. 'resident dwelling' which is exempted from GST. Therefore, this Court is of the considered view that the issue of levy of GST on residential accommodation should be viewed from the perspective of recipient of service and not from the perspective of service provider, who offers the premises on rental basis. Thus, the renting out the hostel rooms to the girl students and working women by the petitioners is exclusively for residential purpose, this Court is of the considered view that the condition prescribed in the Notification in order to claim exemption, viz., 'residential dwelling for use as residence' has been fulfilled by the petitioners and thus the said services are covered under Entry Nos.12 and 14 of the Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017, the petitioners are entitled to be exempted from levy of GST. The impugned orders passed by the 2nd respondent are hereby set aside - Petition allowed.

Summary

Issues Involved:
1. GST Exemption for Hostel Services: Whether hostel and residential accommodation services provided by the petitioners are eligible for GST exemption under Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate).
2. Requirement of GST Registration: Whether the petitioners are required to register under GST if their aggregate turnover exceeds twenty lakh rupees.
3. Applicable Tariff for Hostel Services: Determination of the specific tariff entry applicable to hostel services.
4. Composite Supply of In-House Food: Whether the incidental supply of in-house food to hostel inmates is exempt as part of a composite supply.
5. Applicability of Karnataka High Court Judgment: Whether the judgment of the Karnataka High Court in "Taghar Vasudeva Ambrish vs. Appellate Authority for Advanced Ruling" is applicable to the petitioners' case.

Summary:

1. GST Exemption for Hostel Services:
The petitioners argued that their services of providing residential accommodation to girl students and working women should be exempt from GST under Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate). The Tamil Nadu State Appellate Authority for Advance Ruling ruled that these services do not qualify for the exemption. The High Court, however, held that "the 'hostel services' provided by the petitioners would squarely fall within the purview of Entry No.12 of Exemption Notification No.12 of 2017," thereby qualifying for GST exemption.

2. Requirement of GST Registration:
The Tamil Nadu State Appellate Authority for Advance Ruling stated that the petitioners are required to register for GST if their aggregate turnover exceeds twenty lakh rupees. The High Court did not specifically overturn this requirement but focused on the exemption aspect.

3. Applicable Tariff for Hostel Services:
The ruling authority categorized the supply of hostel services under Tariff heading 9963, taxable at 9% CGST + 9% SGST. The High Court did not specifically address this tariff classification but emphasized the exemption under Entry 12.

4. Composite Supply of In-House Food:
The authority ruled that the supply of in-house food to hostel inmates is part of a composite supply, taxable at 18%. The High Court's focus was on the primary service of providing residential accommodation, which it ruled as exempt.

5. Applicability of Karnataka High Court Judgment:
The petitioners cited the Karnataka High Court's judgment in "Taghar Vasudeva Ambrish vs. Appellate Authority for Advanced Ruling," which held that hostel services are exempt from GST. The High Court of Madras found this judgment applicable and binding, stating that "the law laid down by the Hon'ble Karnataka High Court binds the 2nd respondent also."

Conclusion:
The High Court allowed the writ petitions, setting aside the impugned orders of the Tamil Nadu State Appellate Authority for Advance Ruling. The court ruled that the hostel services provided by the petitioners qualify as "residential dwelling for use as residence" and are thus exempt from GST under Entry No.12 of Exemption Notification No.12 of 2017. The court emphasized that the exemption should be viewed from the perspective of the service recipient and not the provider.