Hostel accommodation services for students and working women not exempt under GST, taxed at 18% rate

The AAR, Tamil Nadu ruled that hostel accommodation services provided to students and working women are not exempt under GST exemption notifications. The Authority held that hostels constitute commercial premises providing temporary lodging, not residential dwellings, and therefore lose exemption status. The services were classified under tariff heading 9963 and taxed at 18% (9% CGST + 9% SGST). The Authority determined that food services provided to hostel inmates form part of a composite supply with accommodation as the principal service, making the entire bundle taxable at 18% rather than qualifying for separate exemption treatment.

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Issues Involved:
1. Eligibility for GST exemption on hostel accommodation under specific notifications.
2. Tariff heading and tax rate for hostel accommodation services.
3. Taxability of in-house food supply to hostel inmates.
4. Scope of ruling under Section 97(2) of the GST Act.

Summary:

Issue 1: Eligibility for GST exemption on hostel accommodation under specific notifications.
The primary issue was whether the hostel accommodation provided by the Applicant qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017. The Authority concluded that the hostel accommodation does not qualify as "residential dwelling for use as residence" because it is a commercial establishment providing temporary lodging with ancillary services, thus not meeting the exemption criteria. The premises rented out by the Applicant cannot be construed as a residential dwelling. The decision of the Karnataka High Court in Taghar Vasudeva Ambrish was noted but not followed as it is pending before the Supreme Court.

Issue 2: Tariff heading and tax rate for hostel accommodation services.
The relevant entries in Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, were considered. The Authority held that hostel services fall under Tariff heading 9963 and are taxable at 9% CGST + 9% SGST under SI.No. 7(vi) of the Notification, distinguishing hostel services from hotel accommodations.

Issue 3: Taxability of in-house food supply to hostel inmates.
The Applicant's provision of in-house food along with accommodation was considered a composite supply. As per Section 2(30) and Section 8 of the CGST Act, 2017, the principal supply (hostel accommodation) determines the tax rate for the composite supply. Therefore, the entire composite supply, including food services, is taxable at 18%.

Issue 4: Scope of ruling under Section 97(2) of the GST Act.
No ruling was issued for the fourth question as it did not fall under the scope of Section 97(2) of the GST Act.

Ruling:
1. Hostel accommodation services are not eligible for exemption under the specified GST notifications.
2. Hostel accommodation services fall under Tariff heading 9963 and are taxable at 18%.
3. The supply of in-house food to hostel inmates is part of a composite supply and is taxable at 18%.
4. No ruling on the fourth question as it is outside the scope of Section 97(2) of the GST Act.

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