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TMI Blog2023 (8) TMI 1554X X X X Extracts X X X X X X X X Extracts X X X X ..... te. 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 Notification (Sl. No. 7 (ix) as per original notification). Taxability of in-house food supply as part of composite supply - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents and working women as hostel accommodation, as since most of the students and working people travel far and wide from their remote villages. The applicant herein also provides food as part of hostel services at nominal rates. But, the choice is given to the inmates to opt for lodging or for boarding and lodging. The Applicant has its own in-house kitchen facilities with their own staff, to provide homely, tasty and healthy food for the inmates. The total charges collected for lodging ranges between Rs. 65/- per day to Rs. 70/- per day. Thus, the monthly tariff per student or per inmate ranges between Rs. 1,950/- to Rs. 2,100/- per month per inmate. They provide single room occupation, or double room sharing, or dormitory style of accommodation and rates vary accordingly. 2.3. In their interpretation of law/facts in respect of the questions raised, the Applicant submitted that- * They have licence to run the residential hostel for boarding and lodging under Section 5 of the Tamil Nadu Hostels and Home for Women and Children (Regulation) Act, 2014 [hereinafter referred to as the "Hostel Regulation Act"]. * Section-2 (e) of the 'Hostels Regulation Act' defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical Exemption Notification under TNGST Act, 2017 underwent an amendment Notification 15/2022-Central Tax (Rate) dated 30.12.2022 wherein an Explanation was inserted in Column-3 against Entry 12 which reads as follows: in the year 2022 by virtue of o "Explanation For the purpose of exemption under this entry, this entry shall cover services by way of renting of residential dwelling to a registered person where,- (i) the registration person is proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and (ii) such renting is on his own account and not that of the proprietorship concern." * The inserted Explanation qualified only occupants/inmates who are registered persons for the purpose of reverse charge and the position remained the same when inmates were unregistered persons; Thus, in the case of the applicant herein, the occupants or the inmates of the residential hostel are either students or working women are not registered persons under the GST Enactments. Thus, in such an event, the exemption that is available under Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adu Hostels and Home for Women and Children (Regulation) Act, 2014 and also definition of 'home for women and children' in Section-2 (d) of the said Act are available. The term 'residential hotel' is defined in Section-2 (14) of the Tamil Nadu Shops & Establishments Act, 1947, and by which hostel cannot be equated to hotel. * The duration of stay in hotel is short and it is a temporary accommodation whereas the duration of stay in a hostel is for a long term. * The hostel are run with a motive to provide safe residence to students and working women/men and charges collected are nominal; Food given is the same for all occupants and no choice in menu given. * The definition of landlord' is given under Section 2(c) and definition of 'tenant' is given under Section 2(n) of Tamil Nadu Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017 [TNRRRLT Act, 2017], from which it can be gathered that the term 'tenant' includes 'sub-tenant' also. Thus, if the Applicant is a tenant, then the hostel inmates are 'sub- tenants' and come within the ambit of 'tenants'. * Further, Section 3 of TNRRRLT Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostels which are used for residential purposes by students or working women. 4.1. The Applicant's jurisdictional State Authority had submitted the following remarks in respect of the questions raised by the Applicant: The request of the applicant is not capable of compliance since: The motive of the Applicant is to run the ladies hostel against the CONSIDERATION and they have also admitted that they are receiving some amount for rendering accommodation and food services, which clearly falls under the ambit of definition of SUPPLY as provided in Section 7 of the TNGST/CGST-Act. * The applicant registered under various acts to run its business. The act of the applicant covers under the definition of the term "Business" as per Section 2(17) of the TNGST /CGST Act which includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; * The applicant is a servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be taxable @ 12% with effect from 30.09.2019 onwards. 4.4. The Joint Commissioner (ST), Intelligence, Coimbatore has informed that no proceeding is pending in respect of the applicant. 5.1. The Applicant's jurisdictional Central Authority has submitted their remarks on the questions raised as under: * Entry 12 of Exemption Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 covering Heading 9963 or Heading 9972 deals with "Service by way of renting of residential dwelling for use as residence". The identical Notification under the TNGST Act, 2017 and Entry 13 of Exemption Notification No. 09/2017 Integrated Tax (Rate) dated 28.06.2017 also cover the heading 9963 or Heading 9972 deals with "Service by way of renting of residential dwelling for use as residence". * The entries referred above have two essential conditions of renting of "residential dwelling" and 2. Use of "residential dwelling" as a place of residence. * For the applicant's hostel to be eligible for exemption under the above mentioned entries, both the conditions should be satisfied. * It is opined that with respect to the condition 1, the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was opined that in the event of requirement of registration, hostel accommodation service provided by the applicant will fall under Sr. No. 7 (i) under the heading 9963 (Accommodation, food and beverage services) i.e. Supply of 'hotel accommodation' having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent and will attract 12% GST with effect from 18th July, 2022 as per the Principal Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 20/2019 - Central Tax (Rate) dated 30.09.2019 and further amended by Notification No. 03/2022 - Central Tax (Rate) dated 13.07.2022. In the Notification No. 20/2019 Central Tax (Rate) dated 30.09.2019, 'Hotel Accommodation' means supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation. 5.5. Further, the Central Authority stated that the questions raised in the application are not pending or has not been decided in any proceedings in the case of the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential dwelling for use as residence. Nil Nil 7.1.2. Now, the fundamental issue to be discussed is 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. - 7.1.3. In this regard, we observe 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, camp site, lodge, house boat, or like places meant for temporary stay. 7.1.4. Generally, renting of residential dwelling involves letting out any building or part of the building by a lessor to a person or family (related persons) against a rent for using rooms which form part of a house as kitchen, bedroom, and living room etc., on the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that, there is no relationship of landlord and tenant between the hostel owners and inmates in as much as the inmates of hostels have no obligation to maintain or repair the fixtures and fittings and there is no division of maintenance responsibility between the hostel owners and inmates which is normally followed in the case renting of residential dwelling to a family or a person. Therefore, it is clear that hostels refer to a place where someone is accommodated or provided with lodging or boarding and lodging facilities against a charge or fees for the services rendered. 7.1.7. Further, we find that there are certain regulatory provisions for running hostels and licence/certificates are to be obtained by a person running hostels in the state of Tamil Nadu under the respective enactments and the Applicant also submitted copies of such licences/certificates: a) The Applicant has Submitted FORM D License issued by the Tahsildar, Coimbatore (North) wherein as per section 2 of the THE TAMIL NADU PUBLIC BUILDING (LICENSING) ACT, 1965, 'hostel is deemed to be a public building' and as per Section 3, 'No building shall be used as a public building without a license and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The AR has strongly placed reliance on the decision of the Hon'ble High Court of Karnataka in the case of Taghar Vasudeva Ambrish Vs. Appellate Authority for Advance Ruling, dated 07.02.2022, wherein it was held that hostel is a residential dwelling and since it is used for residence, the assessee is eligible for exemption. However, it is observed that Special Leave Petition (Civil) No. 29980/2022 has been filed against this order before the Hon'ble Supreme Court of India and the case is pending disposal. 7.1.10. The Applicant has claimed that the buildings used as hostels are 'residential buildings' as per the Zoning Regulations as stated in Rule 33 of the Tamil Nadu Combined Development and Building Rules, 2019. But we find that the eligibility to claim exemption is not solely dependent upon the zoning regulations. Even if the hostels are permitted in residential zone, it does not partake the character of the 'residential dwelling'. The land used for the purpose of Zoning Regulations is not determinative factor to decide whether the impugned property is hostel or residential dwelling for the purposes of tax. Further, the Licenses and Certificates obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue" As per the above settled position of law and under the given circumstances and factual evidences produced, it is clear that the exemption is specific and particular about the housing residence sector and NOT to other places which are not residential that are rented out. 7.1.14. Further, it was observed by The Hon'ble Supreme Court of India in the case of Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise 1991 taxmann.com 73/1990 (47) ELT 491 (SC), that; "in interpreting the scope of any notification, the Court has first to keep in mind the object and purpose of the Notification. All parts of it should be read harmoniously in aid of, and not in derogation of that purpose". Therefore, in order to implement the notification, it is necessary to keep in mind the purpose and the objective of notification. The relevant portion of Notification No. 12/2017-CT (R), Dated 28-6-2017 is reproduced herewith: Sl. No. Chapter/Section/Heading /Group/Service Code (Tariff) Description of Service Rate (percent) Condition 12 Heading 9963 or Heading 9972 Services by way of renting of residential dwelling for use as residence. Nil Nil 7.1.15. From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, food and beverage services) [(i) Supply of "hotel accommodation" having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent. 6 (ii) Supply of 'restaurant service'...... 2.5 (iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms 2.5 (iv) Supply of 'outdoor catering..... 2.5 (v) Composite supply of "outdoor catering" together with renting of premises..... 2.5 (vi) Accommodation, food and beverage services other than (i) to (v) above 9 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, we hold that supply of hostel accommodation services (Tariff heading 9963) is taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices 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. 7.4. Regarding the fourth question raised by the Applicant, no ruling could be issued as the question put forth by the Applicant does not fall under the scope of Section 97(2) of the GST Act. In view of the above position, we give the following ruling; RULING For Question No.1: The services by way of providing hostel accommodation 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. For Question No.2: The supply of services by way of providing hostel accommodation will fall under Tariff heading 9963 and is taxable @ 9% CGST + 9% SGST under Sl.No. 7(vi) of the Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended vide Notification No. 20/2019 -- Central Tax (Rate) dt 30.09.2019. For Question No.3: The activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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