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TMI Blog2023 (8) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... dividuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of renting of residential dwelling for use as residence, being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence. It is clear that hostel accommodation is not equivalent to residential accommodation and hence the services 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. Requirement for GST registration based on turnover - HELD THAT:- It is clear that the Applicant s service of providing hostel accommodation is not eligible for exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply provided by them. X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and meals on payment of a sum of money to a traveller or any member of the public or class of the public'; Thus, the 'hostel' accommodation which falls within the purview of the Hostels Regulation Act' cannot be equated with that of a 'hotel accommodation which falls within the realm of Tamilnadu Shops & Establishments Act, 1947 by any stretch of imagination. * Under the erstwhile Service Tax regime, the 'services by way of renting of residential dwelling for use as residence' was included in the negative list under clause (m) of Section-66D of the Finance Act 1994. Similarly, no VAT was leviable for supplying food to inmates, being an incidental activity to the activity of accommodation and relied on the Hon'ble Andhra Pradesh High Court decision in the case of Bharatiya Vidya Bhavan's Residential Public School v. State of Andhra Pradesh. * Under the Exemption Notifications above mentioned, Entry No. 12 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [ similar entry: Entry 13 of Exemption Notification No.9/2017- Integrated Tax- Rate dated 28.06.2017] reads as follows: Sl. No. Chapter/Section/Heading/Group or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as per which it is any residential accommodation, but does not include hotel, motel, Inn, guest house, camp site, house, lodge, house boat or like places meant for temporary stay.'; To understand the term 'dwelling house' they rely on the decision of the House of Lords in appeal in the case of Uratemp Ventures Limited V. Collins (AP), [2001] UKHL 43 dated 11/10/2001. * They rely on the decision of the Hon'ble Karnataka High Court in the case of Taghar Vasudeva Ambrish -vs- Appellate Authority for Advanced Ruling, Karnataka, wherein the Hon'ble High Court has held the identical question of law in favour of "hostels" and has held that the exemption available in Entry 13 of Exemption Notification No.9/2017- Integrated Tax-Rate dated 28.06.2017 is available to a residential hostel/residential dwelling meant for students or working people. * The hostels attached to educational institutions are exempt from GST and their hostel which essentially caters to students at very nominal charges in contrast to hostels attached to educational institutions, also has to be exempt from the levy of GST and ought to fall outside the scope of levy. * They expend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egorize hostels in 'residential' zone only. * The tenants living in these hostels often give the hostel address as their place of residence for procurement, verification or receiving government, bank or other similar official documents. * Reliance is made on the following decisions: i. The Hon'ble Supreme Court in Para 11 of the judgment in Kishore Chandra Singh Vs Babu Ganesh Prasad Bhagat AIR 1954 SC 316 has held that expression residence only connotes that a person eats, drinks and sleeps at that place and it is not necessary that he should own it. ii. SC decision in Jagir Kaur Vs Jaswant Singh - Criminal appeal 143/1961 dated 13.02.1963 for the word 'reside'. iii. Delhi High Court judgment dated 22.09.1976 in VL Kashyap Vs R P Puri for the word 'dwelling house' or 'residential house'. iv. SC judgment dated 25.03.1981 in Indo International Industries Vs Commissioner of Sales Tax for submission that in the absence of a definition in the Enactment, dictionary meaning/popular meaning can be resorted to. v. SC judgment dated 13.09.2006 in CCE Vs Air Conditioning Corporation. vi. In Balakrishna Vs Sakuntala Bai AIR 1942 MAD 666 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at Source. They are not deducting any TDS under section 194 I of the Income Tax Act. * Hence, the claim of renting of residential dwelling for the use as residence become failure. 4.2. In addition to the above, the State Jurisdictional authority further stated that they are rendering services by way of renting of immovable property with a business motive for pecuniary benefit. These services are classified under Heading 9963 (Accommodation, food and beverage services). The services rendered by the applicant clearly falls under Entry No. 7 (ix) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 viz. Accommodation, food and beverage services other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) above and the rate of tax to the services are the settled one as per rate notification. From the above analysis of the issue in the hands, the following rate of tax is to be levied for the services rendered by the applicant with effect from 01.07.2017 upto 29.09.2019. SAC DESCRIPTION RATE OF TAX 996321 Room or unit accommodation services for students in student residences 18% 996322 Room or unit accommodation services provided by Hostels, Camps, Paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s though given on rent for residential purposes would not amount to "residential dwelling". * Moreover, hostels even though given for residential or lodging purposes are commercial places registered as "commercial establishments" for the purposes of electricity, water, trade licence etc. Therefore, the applicant's hostel cannot be termed as "residential dwelling" and has to be treated as a commercial place only. 5.2. The Central Authority further stated that coming to the second condition of the entry in the notification, it needs to be mentioned that it is intended for residential dwellings which are rented out for use as residence. Assuming but not admitting that the applicant's hostel is a residential dwelling, the same has to be rented out for use as residence. Whereas in the facts of this case it is rented out for use as a hostel facility or paying guest accommodation facility. As it is not rented out for use as residence but rented out as a hostel/paying guest accommodation facility, the exemption can't be extended. To put it in a nutshell, the place rented out is neither a residential dwelling nor being rented out for use as resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.3. The facts of the case as stated by the Applicant are that - * they are running ladies hostel providing boarding and lodging facilities to students and working women. They are also providing certain ancillary services such as housekeeping, security arrangements, Television, parking facility etc. * charges of Rs. 5850/- is being collected per inmate per month for providing all the above facilities including electricity charges; the charges collected are per bed charges and these charges are also dependent on number of persons sharing the room; the invoices to the habitants are raised accordingly. * the premises used for providing these services are owned by the Applicant. 6.4. The Applicant claims that the immovable property being used for providing accommodation is a residential dwelling which is used as residence by the inmates and thereby the rent received on such accommodation qualifies for GST exemption in terms of Entry No. 12 of Notification 12/2017 - Central Tax (Rate), dated 28.06.2017. 7.1.1. The first question raised by the Applicant is whether the hostel accommodation extended by the Applicant hostel would be eligible for exemption under Entry 12 of Exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as living room etc. But, in the instant case, a single house with two or more rooms where normally a single family resides, is subdivided, and let out to different persons and rent being collected on per bed basis with bundle of other services against a consideration clearly constitutes a business of supplying accommodation services along with ancillary services. Thus, on this count as well, the impugned accommodation thus provided does not qualify as a residential dwelling and thus the question of using the same as residence does not arise. 7.1.6. Regarding the second part of the description of service 'for use as residence' it is observed that, though accommodation and residence seems to be synonymous, there is a subtle difference between the two. An accommodation is a location where someone is accommodated or provided with lodging. The term residence on other hand, in common usage, refers specifically to a place where someone resides permanently or for an extended period of time along with family/dependents; Therefore, we observe that hostels are nothing but accommodations which provide temporary lodging to the inmates, whether students or working people. Similar to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Coimbatore City Municipal Corporation under the provisions of the Coimbatore City Municipal Corporation Act, 1981. iii. No objection certificate issued by the District Officer, Tamilnadu Fire and Rescue services. iv. Stability Certificate (Form A) issued by Charted Civil Engineer License issued under Food Safety and Standards Act, 2006, for food services. We find that the above provisions are not mandatory or applicable to a typically residential building or "residence dwelling for use as residence", whereas it is mandatory for a hostel building. This also shows that hostel building cannot be considered as residential dwelling but a non-residential complex. 7.1.8. From the above, it is evident that the premises rented out by the Applicant cannot be construed as residential dwelling in view of the above facts. 7.1.9. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai Vs. Dilip Kumar & Company [2018 (361) E.L.T. 577 (SC)], while answering the question, 'what is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied?' held that: " 52. To sum up, we answer the reference holding as under:- (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes with in the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of revenue" 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 Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivalent to residential accommodation and hence we hold that the services 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. 7.2.1. Regarding the second question raised by the Applicant, from the previous discussions, it is clear that the Applicant's service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is the very much be required to take registration under the GST Enactments, as arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2(b) of the Second Schedule to the CGST Act, the said transaction constitutes "supply". 7.2.2. Thus, the Applicant is a supplier of services and therefore, in terms of Section 22 of the GST Acts, which states t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. Firstly, the service of providing hostel accommodation is not an exempt activity as discussed in the previous paras. It is seen from the submissions of the Applicant, that along with the provision of accommodation services, they are also providing food and certain other services to the inmates of the hostel for consolidated charges. Now it is pertinent to see the definition of 'Composite Supply' which is given under Section 2(30) of the GST Act": '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'. Therefore, the definition implies that a supply of goods and/or services will be treated as composite supply if it fulfils the following three criteria: (a) Supply of two or more goods and services together. (b) Goods o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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