Renting bed spaces with mandatory amenities to students attracts 12% GST as accommodation service, not residential dwelling exemption

AAR Karnataka ruled that renting bed spaces to students and working women with mandatory amenities like food, furniture, and cleaning services does not qualify as "residential dwelling" exemption under GST Notification 12/2017. The accommodation lacks individual kitchens and permanent stay characteristics, resembling paid guest house services. The service attracts 12% GST under SAC 996311 as accommodation with housekeeping services. The applicant can claim input tax credit subject to statutory conditions under CGST Act sections 16-17.

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Issues Involved:
1. Whether renting of residential dwelling to students and working women for residential purposes along with amenities is exempt under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
2. If not exempt, what is the GST rate applicableRs.
3. If taxable, whether the applicant can claim Input Tax Credit (ITC) on inputs used for providing taxable services.

Summary:

Issue 1: Exemption Under Entry No. 12 of Notification No. 12/2017-Central Tax (Rate)
The applicant provides residential accommodation to students and working women along with amenities like food, furniture, and cleaning services. The applicant contends that this service qualifies for exemption under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts "services by way of renting of residential dwelling for use as residence."

The Authority for Advance Rulings (AAR) examined whether the provided accommodation qualifies as a "residential dwelling" for "use as residence." It was noted that the term "residential dwelling" is not explicitly defined in the GST law but is generally understood as a place meant for permanent stay. The applicant's accommodation, which involves renting out units (portions of rooms) with shared facilities and without individual kitchens, does not meet the criteria for a "residential dwelling" intended for permanent residence. Therefore, the service does not qualify for exemption under the said notification.

Issue 2: Applicable GST Rate
Since the service does not qualify for exemption, the applicable GST rate needed determination. The service provided by the applicant falls under SAC 996311, which covers "Room or unit accommodation services" provided by establishments like hotels, inns, and guest houses. The rent charged per person per unit per day is less than Rs. 7,500, making the service liable to GST at 12%, as per entry number 7(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

Issue 3: Claim of Input Tax Credit (ITC)
The applicant sought clarity on whether they can claim ITC on inputs used for providing taxable services. The ruling confirmed that the applicant could claim ITC subject to the fulfillment of conditions stipulated under Sections 16 and 17 of the CGST Act, 2017, and the corresponding rules.

Ruling:
a) Renting of residential dwelling to students and working women along with amenities is not exempt under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
b) The service attracts GST at 12% under SAC 9963, as per entry number 7(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.
c) The applicant can claim ITC on inputs used for providing the taxable services, subject to compliance with Sections 16 and 17 of the CGST Act, 2017.

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