Hostel accommodation and food services constitute mixed supply under CGST Act Section 2(74), not composite supply

The AAAR held that hostel accommodation services providing lodging and boarding to students constitute a mixed supply rather than composite supply under CGST Act Section 2(74). The authority determined that food services are not naturally bundled with hostel accommodation since students are restricted from sourcing food elsewhere, making these separate taxable supplies rather than ancillary services. The appeal was disposed of with the ruling that hostel seat should be considered as a unit of accommodation for determining service classification and exemption eligibility under notification 12/2017.

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Issues Involved:
1. Classification of Hostel Accommodation Service under GST.
2. Determination of the Unit of Accommodation.
3. Nature of Service: Composite Supply vs. Mixed Supply.
4. Eligibility for GST exemption under Notification No. 12/2017.

Detailed Analysis:

1. Classification of Hostel Accommodation Service under GST:
The appellant, a society registered under the Societies Registration Act, 1860, and a Public Charitable Trust under Section 12AA of the Income Tax Act, 1961, provides hostel accommodation services to students of Mody University of Science & Technology (MUST). The primary issue is whether these services, including lodging and boarding, qualify for exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate). The Rajasthan Authority for Advance Ruling (AAR) determined that the service provided is a mixed supply under Section 2(74) of the CGST Act, 2017, and not a composite supply under Section 2(30).

2. Determination of the Unit of Accommodation:
The appellant argued that the unit of accommodation should be a 'Hostel Seat' rather than a 'Room'. The AAR considered the room as the unit of accommodation. The appellant provided examples from different scenarios (Dharamshalas, hotels, airports) to support their argument that the unit of accommodation should be based on the business model and not necessarily a room. The appellate authority agreed with the appellant, stating that in the context of hostels, the tariff is generally fixed per bed, per seat, or per person, and thus, a hostel seat should be considered the unit of accommodation.

3. Nature of Service: Composite Supply vs. Mixed Supply:
The appellant contended that the hostel accommodation service, combined with meals (Food & Beverages), constitutes a composite supply under Section 2(30) of the CGST Act, 2017, with the principal supply being hostel accommodation. They argued that the services are naturally bundled and inseparable in the ordinary course of business. The AAR, however, held that the services provided are not naturally bundled and thus constitute a mixed supply. The appellate authority supported this view, noting that the provision of food services is independent and can be supplied separately, as evidenced by the existence of a separate cafeteria for day scholars.

4. Eligibility for GST Exemption under Notification No. 12/2017:
The appellant sought exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate), which exempts services by a hotel, inn, guest house, club, or campsite for residential or lodging purposes with a declared tariff below Rs. 1000 per day per unit of accommodation. The appellate authority noted that as per Section 8(b) of the CGST Act, 2017, in the case of mixed supply, the highest rate of tax applicable to any of the supplies in the bundle would apply. Therefore, since the supply is classified as mixed, the highest rate of tax applicable to the combined services (accommodation and food) would be charged, negating the exemption sought by the appellant.

Conclusion:
The appeal was disposed of with the following determinations:
- The hostel seat is considered the unit of accommodation.
- The service provided by the appellant is a mixed supply, not a composite supply.
- The highest rate of tax applicable to the mixed supply will be charged, and the exemption under Entry No. 14 of Notification No. 12/2017-CT (Rate) is not applicable.

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