2021 (1) TMI 972 - AAAR - GST

Classification - taxability - provision of hostel accommodation along with food facility to the students wherein consolidated amount is charged from the students - composite supply or principal supply - recovery of entire charge from the students - exemption from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended if the charges per day is less than ₹ 1000/- - taxability on supply of hostel accommodation along with food facility - CBEC Flyer No. 40 dated 01.01.2018. HELD THAT - In the instant case the appellant is supplying various services like supply of food, TV in dining hall, Playroom, Gym, Housekeeping of entire hostel premises, Room cleaning and Washing/ dry-cleaning of bed sheets linen of rooms along with Hostel Accommodation service. The supply of various other services as detailed above with Hostel Accommodation service is not naturally bundled in normal course of business. Each service is an independent service and can be supplied separately. It is obvious that a person can live on the hostel without availing other services like food, TV, gym, etc; but to make ones stay more comfortable, the said ancillary services are availed by him - Rajasthan Authority of Advance Ruling has held that naturally bundled services are those services wherein one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. If current nature of supply of services is tested based on above factors, it can be ascertained that the provision of hostel accommodation could be a principal supply but ancillary services like food, gym, housekeeping, play room, cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundied naturally with principal supply. Rajasthan Authority of Advance Ruling has placed reliance on the ruling of West Bengal Authority for Advance Ruling in the case of Sarj Educational Centre 2019 (2) TMI 1605 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL involving similar facts and circumstances, wherein the applicant was engaged in supplying food and other services, etc and it was held that they are not naturally bundled with the lodging service. All these components are independent of each other. The said ruling has been upheld by the Appellate Authority of Advance Ruling of West Bengal. There are no infirmity in the Advance Ruling pronounced by Rajasthan Authority of Advance Ruling - the Advance Ruling pronounced by the Rajasthan Authority of Advance Ruling upheld - appeal dismissed.

Summary

Issues Involved:
1. Classification of the supply as composite or mixed.
2. Taxability of the entire charge recovered from students.
3. Determination of GST applicability on hostel accommodation with food.
4. Appropriate classification and applicable GST rate.

Issue-wise Detailed Analysis:

1. Classification of the Supply as Composite or Mixed:
The appellant argued that the provision of hostel accommodation along with food and other facilities should be treated as a "composite supply," where the principal supply is the rental of hostel accommodation. They contended that the food and other facilities are incidental and naturally bundled with the principal supply of accommodation. The appellant cited Section 2(30) of the CGST Act, 2017, which defines "composite supply," and provided examples from various sectors like hotels, hospitals, and airlines to support their claim. However, the Authority for Advance Ruling (AAR) concluded that the provision of hostel accommodation along with food, gym, housekeeping, etc., constitutes a "mixed supply" as per Section 2(74) of the CGST Act, 2017. They reasoned that each service could be supplied independently and is not naturally bundled with the principal service of hostel accommodation.

2. Taxability of the Entire Charge Recovered from Students:
The appellant claimed that since the hostel charges per day do not exceed ?1000, the entire activity should be exempt from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017. They referenced CBEC Circular No. 32/06/2018-GST, which clarifies that hostel accommodation services with declared tariffs below ?1000 per day are exempt from GST. The AAR, however, held that since the services provided constitute a mixed supply, the exemption does not apply. Consequently, the entire charge recovered from the students is subject to GST at the highest applicable rate among the services provided, which is 18%.

3. Determination of GST Applicability on Hostel Accommodation with Food:
The appellant argued that the provision of hostel accommodation along with food and other facilities should be treated as a composite supply, thus attracting the GST rate applicable to the principal supply of hostel accommodation. They cited various rulings from other Advance Ruling Authorities to support their claim. However, the AAR concluded that the services provided are not naturally bundled and constitute a mixed supply. Therefore, the entire supply is subject to GST at the highest rate applicable to any of the services provided, which is 18%.

4. Appropriate Classification and Applicable GST Rate:
The appellant sought clarification on the appropriate classification and applicable GST rate for the supply of hostel accommodation along with food and other facilities. They argued that the entire supply should be classified under the principal supply of hostel accommodation and be exempt from GST if the charges per day are less than ?1000. The AAR, however, classified the supply as a mixed supply and determined that the applicable GST rate is 18%, as it is the highest rate among the services provided.

Conclusion:
The Appellate Authority upheld the AAR's ruling, stating that the provision of hostel accommodation along with food, gym, housekeeping, etc., constitutes a mixed supply. Consequently, the entire charge recovered from the students is subject to GST at the highest applicable rate of 18%. The appeal filed by the appellant was rejected.