AAR rules hostel services under Rs. 1000 per day constitute mixed supply, not naturally bundled services

The AAR ruled that hostel services including lodging and boarding provided to students for under Rs. 1000 per day constitute a mixed supply, not naturally bundled services. The accommodation and food services were deemed separate as food is not naturally ancillary to accommodation. Since the applicant failed to clarify the number of students per room/unit, GST rates per notification 11/2017-CT(Rate) apply based on unit tariff. The mixed supply attracts the highest applicable GST rate among the constituent services. The applicant was denied exemption under entry 14 of notification 12/2017-CTR.

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Issues Involved:
- Classification of goods or services
- Applicability of a notification issued under the provisions of the GST Act
- Determination of time and value of supply of goods or services
- Determination of liability to pay tax on any goods or services

Issue-Wise Detailed Analysis:

1. Classification of Goods or Services:
The applicant, Mody Education Foundation (MEF), provides hostel facilities including lodging and boarding services to students of Mody University of Science & Technology (MUST). The core issue is whether these services fall under the exemption provided in Entry No. 14 of Notification No. 12/2017-CTR dated 28-06-2017, which exempts services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff of a unit of accommodation below Rs. 1000 per day.

2. Applicability of Notification:
The applicant contends that the hostel facility charges recovered from students, being less than Rs. 1000 per day, should be exempt from GST under the said notification. They argue that the services provided, including lodging and boarding, are naturally bundled and should be treated as a single service, thereby qualifying for the exemption.

3. Determination of Time and Value of Supply:
MEF charges students on a yearly basis for the hostel facilities, but the daily value of the service is less than Rs. 1000. The applicant believes that this pricing structure should qualify for the exemption under the notification.

4. Determination of Liability to Pay Tax:
The applicant asserts that the hostel services, including food, should be exempt from GST as they are naturally bundled services. They reference various guidelines and previous rulings to support their claim that these services should be treated as a composite supply with the principal service being accommodation.

Findings, Analysis & Conclusion:

1. Nature of Supply:
The ruling examines whether the combined services of lodging and boarding provided by MEF constitute a composite supply or a mixed supply. A composite supply involves services that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one service being the principal supply. In contrast, a mixed supply involves two or more individual supplies made together for a single price, which do not constitute a composite supply.

2. Composite vs. Mixed Supply:
The authority finds that the ancillary services like food do not naturally bundle with the principal service of hostel accommodation. Therefore, the services provided by MEF do not qualify as a composite supply but rather as a mixed supply.

3. Tax Implications of Mixed Supply:
For mixed supplies, the highest rate of GST applicable to any of the individual services in the bundle applies to the entire supply. Since the services provided by MEF include food services, which attract a higher GST rate, the highest rate of tax will be applicable to the entire mixed supply.

4. Exemption Applicability:
The ruling concludes that MEF’s services do not qualify for the exemption under Entry No. 14 of Notification No. 12/2017-CTR, as the services are not naturally bundled and therefore do not constitute a composite supply. The applicable GST rate will be determined based on the highest rate among the services provided.

Ruling:
The applicant, Mody Education Foundation, is not eligible for the exemption under Entry No. 14 of Notification No. 12/2017-CTR dated 28-06-2017. The services provided are classified as a mixed supply, and the highest rate of GST applicable to any of the services in the bundle will apply to the entire supply.

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