Hostel accommodation with food and services deemed mixed supply subject to 18% GST rate

The Appellate Authority affirmed the ruling of the Authority for Advance Ruling, determining that the provision of hostel accommodation along with food and additional services constitutes a mixed supply. Consequently, the entire charge collected from students is subject to GST at the highest applicable rate of 18%. The appellant's appeal was dismissed.

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Issues Involved:
1. Classification of the supply as composite or mixed.
2. Taxability of the entire charge recovered from students.
3. Determination of GST applicability on hostel accommodation with food.
4. Appropriate classification and applicable GST rate.

Issue-wise Detailed Analysis:

1. Classification of the Supply as Composite or Mixed:
The appellant argued that the provision of hostel accommodation along with food and other facilities should be treated as a "composite supply," where the principal supply is the rental of hostel accommodation. They contended that the food and other facilities are incidental and naturally bundled with the principal supply of accommodation. The appellant cited Section 2(30) of the CGST Act, 2017, which defines "composite supply," and provided examples from various sectors like hotels, hospitals, and airlines to support their claim. However, the Authority for Advance Ruling (AAR) concluded that the provision of hostel accommodation along with food, gym, housekeeping, etc., constitutes a "mixed supply" as per Section 2(74) of the CGST Act, 2017. They reasoned that each service could be supplied independently and is not naturally bundled with the principal service of hostel accommodation.

2. Taxability of the Entire Charge Recovered from Students:
The appellant claimed that since the hostel charges per day do not exceed Rs. 1000, the entire activity should be exempt from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017. They referenced CBEC Circular No. 32/06/2018-GST, which clarifies that hostel accommodation services with declared tariffs below Rs. 1000 per day are exempt from GST. The AAR, however, held that since the services provided constitute a mixed supply, the exemption does not apply. Consequently, the entire charge recovered from the students is subject to GST at the highest applicable rate among the services provided, which is 18%.

3. Determination of GST Applicability on Hostel Accommodation with Food:
The appellant argued that the provision of hostel accommodation along with food and other facilities should be treated as a composite supply, thus attracting the GST rate applicable to the principal supply of hostel accommodation. They cited various rulings from other Advance Ruling Authorities to support their claim. However, the AAR concluded that the services provided are not naturally bundled and constitute a mixed supply. Therefore, the entire supply is subject to GST at the highest rate applicable to any of the services provided, which is 18%.

4. Appropriate Classification and Applicable GST Rate:
The appellant sought clarification on the appropriate classification and applicable GST rate for the supply of hostel accommodation along with food and other facilities. They argued that the entire supply should be classified under the principal supply of hostel accommodation and be exempt from GST if the charges per day are less than Rs. 1000. The AAR, however, classified the supply as a mixed supply and determined that the applicable GST rate is 18%, as it is the highest rate among the services provided.

Conclusion:
The Appellate Authority upheld the AAR's ruling, stating that the provision of hostel accommodation along with food, gym, housekeeping, etc., constitutes a mixed supply. Consequently, the entire charge recovered from the students is subject to GST at the highest applicable rate of 18%. The appeal filed by the appellant was rejected.

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