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TMI Blog2021 (1) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate Limited, A-14-A, Road No. 1, Indraprastha Industrial Area, Kota (Raj.) (hereinafter also referred to as 'the Appellant') against the Advance Ruling No. RAJ/AAR/2019-20/30 dated 09.01.2020. 3. Brief Facts of the case 3.1 M/s. Kalani Infrastructure Pvt. Ltd. (hereinafter referred to as appellants) is registered under GST law with GSTIN 08AACCK1540L1ZK, having their registered address at A-14- A, Road No. 1, Indraprastha Industrial Area, Kota (Raj.). M/s. Fortune Icon, a unit of M/s. Kalani Infrastructure Pvt. Ltd. is running a Hostel for residential accommodation of students. The appellant wish to charge a consolidated amount of Rs. 17,000/- per month from the students against provision of hostel accommodation for residence purposes which would also include ancillary supply of food with certain other facilities. 3.2 It has been submitted that primarily the students approach for having accommodation facility and only when accommodation facility' gets ensured, need for food and other allied facilities arises. Neither the appellants wish to charge any separate amount for supply of food or other general facilities from the students nor there is any bifurcation of the charges f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017. (c) As various services provided by the applicant constitute a Mixed Supply, the rate of GST on whole supply will be the rate of supply which attracts highest rate of GST. As the highest rate amongst services provided is 18%, accordingly, rate of GST on whole supply will be 18% (SGST 9% + CGST 9%). 3.6 Aggrieved by the aforesaid Ruling above, the appellant has preferred the present appeal before this forum. GROUNDS OF APPEAL 4. The appellant in its Appeal has, inter-alia, mentioned the following grounds of Appeal: 4.1 The provision of hostel accommodation, food with other general facilities shall be treated as composite supply, where principal supply is renting of accommodation 4.1.1 In the present case, the Appellants are running hostel accommodation for students in Kota. The appellants principally provide hostel accommodation alongwith incidental supply of food to all students wherein a consolidated amount of Rs. 17,000/- per month is charged from the students. There is no system wherein student is provided with a choice to opt for hostel accommodation without incidental su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the normal course of business, and (c) Value of each supply is not identifiable separately. Further, it shows that there is no concept whether such incidental supplies results into any better enjoyment of main supply or that whether same are available independently also in the market. 4.1.6 A perusal of the example given in statute for composite supply shows that when goods are supplied along with transportation, insurance and packing material are incidental supplies whereas supply of goods is principal supply. It is common knowledge that there can be supply of goods at doorstep of supplier without any transportation or without any transit insurance or that supply of transportation service or insurance service can also be independently and commonly available outside or that quality of supply of goods would not change whether transportation and insurance is inclusive in the scope of supplier or not. Irrespective of above it is covered by composite supply of goods where the packing material, transportation, insurance is considered as incidental. The logic behind it is that basically the customer approached for supply of goods and therefore, that is the principal supply and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply' and that the entire supply is considered as that of supply of hotel accommodation and accordingly classified and taxed. It is never argued that gym facility can be taken outside also or that swimming pool facility can be available outside also or that accommodation facility can be provided without gym, TV, laundry, swimming pool also, b) Medical treatment is provided in many hospitals where in many cases the consideration includes rooms for patients as well as attendants, housekeeping of entire premises & rooms, laundry of bed sheets, linen of rooms, supply of food for patients, TV in rooms and common area etc. Here also medical services are considered as principal supply because that is the purpose for which a patient comes to hospital and all other are incidental supplies/facilities. Even though incidental supplies are individually liable to GST, but medical services as a whole are not made liable to GST being principal supply. This is inspite of the fact that in many cases the same hospital or other hospitals may not provide medical services under the single package but may be charging separately for doctor services, medicines, rooms etc. and inspite of that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow: - "Bundled service' means a bundle of provision of various services where in an element of on provision of one service is combined with an element or elements of provision of any other service or services. An example of 'bundled service' would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determination of value of two services for the purpose of charging service tax is different." The rule is - 'If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character' 4.1.12 Further, C31C has elaborated in its E-flyer issued on 'Composite and mixed supplies' after introduction of GST as under: 'Hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e elements are normally advertised as a package and the different elements are not available separately Applicant does not provide any facility wherein the student can avail hostel accommodation without food or other facilities or vice versa. Stay alongwith such facilities are advertised as a package. This is supported from the copy of the brochure enclosed as Annexure-5 The different elements are integral to one overall supply - If one or more is removed, the nature of the supply woods be affected Hostel accommodation is the principal supply here. In absence of hostel accommodation services, there would be no existence of food and other facilities 4.1.14 The term 'principal supply' has been defined under Section 2(90) of the CGST Act, 2017 as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. Here, the principal supply is the renting of hostel accommodation services and food & other facilities are ancillary to principal supply of hostel accommodation services. Thus, the accommodation facilities at hostel is the only principal supply and all the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er day or equivalent exempted under Serial No. 14 of said notification. No ambiguity as regards fact that primarily occupants approach Hostel facility providers for having accommodation facility and only when accommodation facility gets ensured, need for other allied facilities arose - No other charges collected from occupants for allied services provided." 41.17 The same principle has been applied by Hon'ble Authority for Advance Ruling, Kerala in the case of M/s. Ernakulam Medical Centre Pvt. Ltd. vide Advance Ruling No. KER/16/2018, dated 19-9-2018 [2018 (18) G.S.T.L. 142 (A.A.R. - GST)] = 2018 (10) TMI 511 - AUTHORITY FOR ADVANCE RULINGS, KERALA, to hold that supply of medicines and allied items like food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of health care service and not separately taxable. 4.1.18 In the case of M/s. ALL RAJASTHAN CORRUGATED BOARD AND BOX MANUFACTURERS ASSOCIATION, reported at 2019 (7) TMI 847 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN, the question before Rajasthan Advance Ruling authority was whether the Service provided by the applicant to the delegates and exhibitors wherein all-inclusive regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wardrobes etc. Here, the principal component is renting of residential dwelling which includes additional facilities. There is no dispute that entire lease rentals for residential dwelling is treated as exempt supply. The relevant case law is reproduced below: * In the case of RAGHAVA ESTATES & PROPERTIES LTD., 2016 (45) S.T.R. 573 (A.A.R.) = 2016 (9) TMI 331 - AUTHORITY FOR ADVANCE RULINGS, it has held that Construction of Individual Residential House - Services of obtaining local sanctions - Bundled service - Exemption - There being a common agreement for obtaining necessary plan sanctions from Local self-Government bodies and then building individual house for customer, said bundled activity exempted from Service Tax, construction of individual house being prime service - Had there been separate agreement, services provided for obtaining sanctions, would have been taxable 4.2 The Composite Supply of that hostel accommodation along with food facility would be exempt as per Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended. 4.2.1 A perusal of above facts shows that hostel accommodation along with food facility would be treated as composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBIC Circular No. 32/06/2018-GST, dated 12th February, 2018. 5. PERSONAL HEARING A personal hearing in the matter was held on 17.03.2020. Sh. Keshav Maloo C.A., authorised representatives of the appellant and Sh. Nikhil M. Jhanwar C.A., appeared for personal hearing on 17.03.2020 on behalf of the appellant and reiterated the written submission. They submitted additional submission of CBEC Flyer No. 40 dated 01.01.2018 and Service Tax Education Guide. The relevant portion which has been stressed upon by the appellant are reproduced below: CBE & C Flyer No. 40 dated 01.01.2018: Composite and Mixed Supply in so far as Education is concerned. Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 2(30) read with section 8 of the CGST Act, 2017. Such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business. Therefore, the bundle of services will be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them chargeable to different effective rates of tax. None of the individual constituents are able to provide the essential character of the service. However, if the service is described as convention service it is able to capture the entire essence of the package. Thus the service may be judged as convention service and chargeable to full rate. However it will be fully justifiable for the hotel to charge individually for the services as long as there is no attempt to offload the value of one service on to another service that is chargeable at a concessional rate. 9.2.2 Services which are not naturally bundled in the ordinary course of business The rule is - 'If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax.' Illustrations - * * A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. * Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - * There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. * The elements are normally advertised as a package. * The different elements are not available separately. * The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng/ dry-cleaning of bed sheets & linen of rooms are ancillary' services, naturally bundled with the principal service of Accommodation service. Accordingly, the appellant has requested to set aside/ modify the impugned Advance Ruling passed by the Rajasthan Authority of Advance Ruling and declare the impugned package a composite supply wherein Hostel Accommodation is principal supply and food and other facilities are only incidental to it. 6.4.1 Before examining the contention of the appellant it is imperative to go through the relevant provision of the CGST Act which defines the term Composite supply and Mixed supply. We find that as per section 2(30) of CGST Act, 2017 "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration.- Where goods are packed end transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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