2019 (2) TMI 1605 - AAR - GST

Ruling: Applicant's Mixed Services Taxed at 18% under GST Act

The ruling determined that the Applicant's services, including lodging, housekeeping, laundry, medical assistance, and food provided to students, ... Composite supply - mixed supply - treatment of mixed supply under Section 8(b) - exemption for accommodation services below declared tariff of Rs.1000 per unit per day - classification and taxability of component services (lodging, food, housekeeping, laundry)Exemption for accommodation services below declared tariff of Rs.1000 per unit per day - exemption to educational institutions - Applicability of exemption entries of the Exemption Notification to the Applicant's services - HELD THAT: - Sl. No. 66 of the Exemption Notification applies only to services provided by or to an educational institution as defined in the notification; the Applicant is not an educational institution and charges consideration directly to individual students who are therefore recipients of the Applicant's services. Separately, lodging provided at a declared tariff below Rs.1000 per unit per day falls within Sl. No. 14 of the Exemption Notification and is therefore exempt. The factual finding that lodging tariffs for boarders fall below Rs.1000 per unit per day supports application of that exemption to the lodging component, but Sl. No. 66 is not attracted to the Applicant. [Paras 4]Sl. No. 66 is not applicable to the Applicant; lodging offered at tariff below Rs.1000 per unit per day is exempt under Sl. No. 14.Composite supply - Whether the bundle of services supplied by the Applicant constitutes a composite supply under Section 2(30) - HELD THAT: - Although services are offered in a bundle, they are not indivisible and different considerations are charged for different packages depending on recipients' needs (for example, day boarders do not receive laundry). The services are therefore separable in the ordinary course of business and not supplied only in conjunction with one dominant supply. The factual structure of separate packages and differing charges leads to rejection of the composite supply characterization. [Paras 4]The combinations of services offered are not composite supplies as defined under Section 2(30).Classification and taxability of component services (lodging, food, housekeeping, laundry) - Tax treatment of individual component services supplied in the bundle - HELD THAT: - The Authority classifies the lodging facility (when below the tariff threshold) as exempt under Sl. No. 14. Food supplied to the recipients is taxable at the rate corresponding to Sl. No. 7(i) of the Rate Notification. Housekeeping and maintenance services are classifiable under the relevant SAC and taxable at 18% under the Rate Notification entry relied upon by the Authority. Laundry service is classifiable under the relevant SAC and taxable at 18% under the Rate Notification entry relied upon. These classifications follow from the nature of each service and the entries in the Rate and Exemption Notifications as applied to the factual package offered. [Paras 4]Lodging (below tariff threshold) is exempt; food is taxable at the rate specified under Sl. No. 7(i); housekeeping and laundry are taxable at 18% under the Rate Notification.Mixed supply - treatment of mixed supply under Section 8(b) - Whether the bundled consideration should be treated as a mixed supply and taxed accordingly - HELD THAT: - Because the Applicant offers several distinct services in different combinations and the combinations include taxable and non taxable supplies, the bundle qualifies as a mixed supply within the meaning of Section 2(74). Section 8(b) directs that a mixed supply comprising two or more supplies shall be treated as that supply which attracts the highest rate of tax. As the combinations include services taxable at 18%, the entire value of the combination is to be taxed at the highest applicable rate under Section 8(b). [Paras 4]The combinations are mixed supplies and, under Section 8(b), the entire value of each combination is taxable at the highest rate applicable (18%).Final Conclusion: The Authority ruled that the Applicant's bundled offerings are not composite supplies but mixed supplies; lodging (where declared tariff is below Rs.1000 per unit per day) is exempt, component services such as food, housekeeping and laundry are taxable as classified, and under Section 8(b) the entire bundled consideration is taxable at the highest applicable rate (18%). Issues:1. Admissibility of the Application2. Interpretation of composite supply under GST Act3. Applicability of exemption under Notification No. 12/2017-CT (Rate)4. Classification and taxability of services providedIssue 1: Admissibility of the ApplicationThe Applicant sought a ruling on whether their service to students for lodging along with food constitutes a composite supply under the GST Act and is eligible for exemption under Notification No. 12/2017-CT (Rate). The Advance Ruling Authority found the application admissible under Section 97(2)(a) & (b) of the GST Act as the question raised had not been decided by any authority and no objection was raised by the Revenue officer.Issue 2: Interpretation of Composite SupplyThe Applicant provided services to students including lodging, housekeeping, laundry, medical assistance, and food under a consolidated charge. The Revenue suggested the services might fall under Composite Supply, but the Authority determined the services were not composite as different considerations were paid for different packages of services offered, making them mixed supplies taxable at the highest applicable rate of 18%.Issue 3: Applicability of ExemptionThe Authority clarified that the Applicant, not being an educational institution, did not qualify for exemption under Sl. No. 66 of the Exemption Notification. However, lodging facilities offered below Rs. 1000 per day were exempt under Sl. No. 14 of the Exemption Notification, while food was taxable at 5% rate. Housekeeping and laundry services were classified and taxable at 18% under specific entries in the Rate Notification.Issue 4: Classification and Taxability of ServicesThe Authority observed that the services offered were a mixed supply, not composite, as different considerations were charged for different service packages. As a mixed supply, the entire combination of services was taxable at the highest rate of 18% under Section 8(b) of the GST Act. The ruling stated that the value of the services offered would be taxable at the applicable rate, considering them as mixed supplies.In conclusion, the ruling declared that the Applicant's services were mixed supplies, not composite, and were taxable at the applicable rate. The decision was valid unless declared void under the provisions of the GST Act.