Hostel accommodation services don't qualify for GST exemption under Entry 12 of Notification 12/2017-CT, taxable at 18%

The AAR, Tamil Nadu ruled that hostel accommodation services provided by the applicant do not qualify for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The authority held that hostel accommodation differs from residential dwelling as it provides lodging with ancillary services like food and housekeeping on per-bed basis, constituting business activity rather than residential use. The applicant must register under GST if turnover exceeds twenty lakh rupees. Hostel services are taxable at 18% (9% CGST + 9% SGST) under tariff heading 9963, not hotel rates. The composite supply including accommodation and food services attracts 18% tax rate based on the principal supply.

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Issues Involved:
1. Eligibility for GST exemption for hostel accommodation.
2. Requirement for GST registration.
3. Applicable GST rate for hostel accommodation services.
4. Taxability of incidental supply of in-house food.
5. Additional issue outside the scope of Section 97(2) of the GST Act.

Summary of Judgment:

1. Eligibility for GST exemption for hostel accommodation:
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). The Authority determined that the term "residential dwelling" does not include hostels, which are considered commercial establishments providing temporary lodging. As such, the services supplied by the Applicant are not eligible for exemption under the specified entry.

2. Requirement for GST registration:
The Applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. The arrangement between the Applicant and the hostel occupants constitutes a "supply" in the course of business under Section 7(1)(a) of the CGST Act, 2017.

3. Applicable GST rate for hostel accommodation services:
The supply of hostel accommodation services falls under Tariff heading 9963 and is taxable at 9% CGST + 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended by Notification No. 20/2019 - Central Tax (Rate).

4. Taxability of incidental supply of in-house food:
The activity of supplying in-house food to hostel inmates is considered part of a composite supply, with the principal supply being hostel accommodation services. Therefore, the composite supply is taxable at the rate applicable to the principal supply, which is 18%.

5. Additional issue outside the scope of Section 97(2) of the GST Act:
No ruling was issued for the fifth question as it did not fall within the scope of Section 97(2) of the GST Act.

Ruling:
1. Services by way of providing hostel accommodation are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. The Applicant must register for GST if their turnover exceeds twenty lakh rupees.
3. Hostel accommodation services are taxable at 9% CGST + 9% SGST.
4. The supply of in-house food is part of a composite supply taxable at 18%.
5. No ruling for the fifth question as it is outside the scope of Section 97(2) of the GST Act.

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