2022 (3) TMI 850 - AAR - GST

Exemption from GST or not - Hostel facility which includes lodging and Boarding service provided by MEF to the students of must having value of service upto ₹ 1000/- per day - naturally bundled services or not - applicability of exemption under entry no. 14 of the notification 12/2017 CTR Dt 28.06.2017 - 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 cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundled naturally with principal supply - here the said supply is not a Composite Supply, therefore, the facts of the case can be examined in respect of Mixed Supply. The services supplied by the applicant such as hostel accommodation, food etc. to the student of Rs. Less than 1000/- per day per student is not a Composite supply, hence, the services the applicant is supplying is Mixed Supply as per GST Act, 2017 and the applicable rate of tax is the highest rate applicable to the various services supplied by the applicant. The exemption to accommodation service is applicable in respect of a unit of accommodation where tariff is below ₹ 1000/- per day. Notification No. 11/2017-CT(Rate) as discussed provides applicable GST rate as per declared tariff of a unit of accommodation. Further, accommodation having declared tariff of a unit of accommodation of one thousand rupees and above but less than two thousand five hundred rupees per unit per day or equivalent, the GST rate will be charged 12%, further accommodation having declared tariff of a unit of accommodation of two thousand five hundred rupees and above but less than seven thousand five hundred rupees per unit per day or equivalent, the GST Rate will be charged 18%, further accommodation having declared tariff of a unit of accommodation of seven thousand five hundred rupees above per unit per day or equivalent, the GST Rate wall be charged 28% - the applicant has stated in their application that they will charge below ₹ 1000/-per student per day, but it has not been declared by the applicant that how many Student will stay in a room, if more than one students wall stay in a room then GST rate will be chargeable, since the applicant did not make clear that how many students wall stay in a room/unit, hence considering non-clarity of tariff of a unit of accommodation, the GST rate as per notification no. 11/2017-Central Tax (Rate), dated 28.06.2017 will be applicable to the applicant. Further, the applicant is providing service of serving of food to students in hostel. The said service is classifiable under HSN 9963 as provided under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and GST rate will be applicable as per the above notification - the services supplied by the applicant is a Mixed Supply and highest rate of GST will be applicable amongst services provided by the applicant to students in hostel. The applicant would not be eligible for exemption under entry no. 14 of the Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017.

Issues Involved:
- Classification of goods or services
- Applicability of a notification issued under the provisions of the GST Act
- Determination of time and value of supply of goods or services
- Determination of liability to pay tax on any goods or services

Issue-Wise Detailed Analysis:

1. Classification of Goods or Services:
The applicant, Mody Education Foundation (MEF), provides hostel facilities including lodging and boarding services to students of Mody University of Science & Technology (MUST). The core issue is whether these services fall under the exemption provided in Entry No. 14 of Notification No. 12/2017-CTR dated 28-06-2017, which exempts services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff of a unit of accommodation below ?1000 per day.

2. Applicability of Notification:
The applicant contends that the hostel facility charges recovered from students, being less than ?1000 per day, should be exempt from GST under the said notification. They argue that the services provided, including lodging and boarding, are naturally bundled and should be treated as a single service, thereby qualifying for the exemption.

3. Determination of Time and Value of Supply:
MEF charges students on a yearly basis for the hostel facilities, but the daily value of the service is less than ?1000. The applicant believes that this pricing structure should qualify for the exemption under the notification.

4. Determination of Liability to Pay Tax:
The applicant asserts that the hostel services, including food, should be exempt from GST as they are naturally bundled services. They reference various guidelines and previous rulings to support their claim that these services should be treated as a composite supply with the principal service being accommodation.

Findings, Analysis & Conclusion:

1. Nature of Supply:
The ruling examines whether the combined services of lodging and boarding provided by MEF constitute a composite supply or a mixed supply. A composite supply involves services that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one service being the principal supply. In contrast, a mixed supply involves two or more individual supplies made together for a single price, which do not constitute a composite supply.

2. Composite vs. Mixed Supply:
The authority finds that the ancillary services like food do not naturally bundle with the principal service of hostel accommodation. Therefore, the services provided by MEF do not qualify as a composite supply but rather as a mixed supply.

3. Tax Implications of Mixed Supply:
For mixed supplies, the highest rate of GST applicable to any of the individual services in the bundle applies to the entire supply. Since the services provided by MEF include food services, which attract a higher GST rate, the highest rate of tax will be applicable to the entire mixed supply.

4. Exemption Applicability:
The ruling concludes that MEF’s services do not qualify for the exemption under Entry No. 14 of Notification No. 12/2017-CTR, as the services are not naturally bundled and therefore do not constitute a composite supply. The applicable GST rate will be determined based on the highest rate among the services provided.

Ruling:
The applicant, Mody Education Foundation, is not eligible for the exemption under Entry No. 14 of Notification No. 12/2017-CTR dated 28-06-2017. The services provided are classified as a mixed supply, and the highest rate of GST applicable to any of the services in the bundle will apply to the entire supply.

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