2020 (9) TMI 634 - AAR - GST

Tax exemption denied for accommodation-based services at Nimba Nature Cure Village; not classified as health care.

In Re : M/s. Oswal Industries Ltd.

The case involved the classification of services provided by M/s. Oswal Industries Ltd. operating Nimba Nature Cure Village for tax exemption eligibility. ... Classification of supply - Composite Supply or Mixed Supply - Benefit of entry No.74 of exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - Applicability of Clinical Establishment Act, 2010 - wellness facilities are provided with the help of highly qualified professionals’ doctors in the field of naturopathy, researchers, and support staff - Pre and Post GST regime - registration under Service Tax - HELD THAT:- The entire package consists of the above 3 components and the packages would not be possible without any one of the 3 components. In other words, the packages offered by the applicant are naturally bundled and would be aptly covered under the definition of Composite Supply. Further, the principal supply would be the accommodation services since the therapy can in no way be administered without accommodation. In fact, there is no option available for the customer to avail the wellness package without opting for the accommodation. Thus, the accommodation service attains the nature of the principal supply and the other two components attain the nature of ancillary services. Classification - liability of tax - HELD THAT:- In view of Section 8 of the CGST Act, 2017, it can be seen that a composite supply comprising of two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. Therefore, in the instant case, the composite supply of services would be treated as a supply of accommodation service falling under Heading 9963 and specific heading 996311 (Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like) as per Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 - The ‘composite supply’ of service provided by the applicant would be covered under Entry No. 7(vi) and 7(viii) of Notification No.11/2017-Central Tax (Rate). As per Entry No. 7(vi) above, rate of GST would be 18%(9% SGST + 9% CGST) in case of units having declared tariff rates of more than ₹ 2,500/- and less than ₹ 7,500/-, whereas as per Sr.7(viii) above, rate of GST would be 28%(14% SGST + 14% CGST) in case of units having declared tariff rates of ₹ 7,500/- or more. The said notification has been amended a few times vide Notification No.13/2018-Central Tax (Rate) dated 26.07.2018 and Notification No.20/2019-Central Tax (Rate) dated 30.09.2019, where the rates of GST have been altered. These amendments will have to be taken into consideration by the applicant, while discharging their service tax liabilities. Whether the applicant is eligible to get the benefit of entry No.74 of exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017? - HELD THAT:- The supply of services mentioned at Sr.No.74 of the aforementioned Notification pertain to: (a) Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above. The said services, which are classified under Heading 9993, have been exempt from payment of GST. Thus, the supply of services provided by the applicant, which is a composite supply, has been classified under Sub-Heading No.996311 under ‘Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like’. The exemption at Entry No.74 of Exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is applicable to services falling under the Heading 9993. However, the nature of services provided by the applicant is covered under the Sub-Heading 996311 - the exemption available at Entry No.74 of Exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the applicant. Issues Involved:1. Classification of services provided by the applicant.2. Eligibility for exemption under Entry No.74 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.Issue-wise Detailed Analysis:1. Classification of Services Provided by the Applicant:The applicant, M/s. Oswal Industries Ltd., operates Nimba Nature Cure Village, offering wellness facilities such as Naturopathy, Ayurveda, Yoga and meditation, Physiotherapy, and Special therapy. They claim their services fall under Heading 9993 (human health and social care services) as per Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. Specifically, they argue that their services fall under Sub-heading 999319, which includes 'Other human health services including homeopathy, unani, ayurveda, naturopathy, acupuncture and the like.'Upon examination, it was found that the services provided by Nimba Nature Cure Village are strictly on a residential basis. The consideration for these services is primarily based on the type of room and occupancy, indicating that accommodation is a mandatory component of the service package. The packages offered include accommodation, food, and various therapies, which are naturally bundled and provided in conjunction with each other, making it a composite supply as defined under Section 2(30) of the CGST Act, 2017. The principal supply in this composite supply is the accommodation service, classified under Heading 9963 and specific heading 996311 (Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like).2. Eligibility for Exemption under Entry No.74 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017:The applicant sought exemption under Entry No.74 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, which exempts 'health care services by a clinical establishment, an authorised medical practitioner or para-medics' classified under Heading 9993.However, since the services provided by the applicant are classified under Sub-heading 996311 (accommodation services), they do not fall under Heading 9993. Therefore, the exemption under Entry No.74 is not applicable to the applicant.Conclusion:The services provided by M/s. Oswal Industries Ltd. (Nimba Nature Cure Village) are classified under Sub-heading 996311 (Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like) and not under Heading 9993. Consequently, the applicant is not eligible for the exemption under Entry No.74 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.Ruling:The applicant M/s. Oswal Industries Ltd. (M/s. Nimba Nature Cure Village) is not eligible to get the benefit of entry No.74 of exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.