2023 (8) TMI 1554 - AAR - GST

Hostel accommodation services taxable at 18% GST, not exempt under residential accommodation provisions, food supply treated as composite service

IN RE : TVL. SNEGITHI LADIES HOSTEL AND CATERING

IN RE : TVL. SNEGITHI LADIES HOSTEL AND CATERING - TMI Issues Involved:1. Eligibility for GST exemption on hostel accommodation services.2. Tariff heading and rate of taxability for hostel accommodation services.3. Taxability of in-house food supply as part of composite supply.4. Admissibility of certain questions under Section 97(2) of the GST Act.Issue-Wise Detailed Analysis:1. Eligibility for GST Exemption on Hostel Accommodation Services:The primary issue was whether the hostel accommodation provided by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017, which exempts 'services by way of renting of residential dwelling for use as residence.' The term 'residential dwelling' is not explicitly defined under the CGST Act or the notification. However, based on the interpretation under the erstwhile service tax regime, a residential dwelling is typically a place where people reside treating it as a home, not including temporary accommodations like hostels. The judgment noted that the Applicant's hostel services, which involve renting out beds with additional services, do not qualify as renting a residential dwelling for use as residence. The ruling emphasized that hostels are commercial establishments providing temporary lodging, and thus, the exemption does not apply.2. Tariff Heading and Rate of Taxability for Hostel Accommodation Services:The judgment addressed the appropriate tariff heading and tax rate for the Applicant's hostel accommodation services. It was determined that the services fall under Tariff heading 9963, which pertains to 'Accommodation, food and beverage services.' The applicable tax rate for these services is 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment clarified that hostel services, being different from hotel accommodations, are subject to this specific tax rate.3. Taxability of In-House Food Supply as Part of Composite Supply:The Applicant argued that the supply of in-house food to hostel inmates should be considered part of a composite supply, potentially exempt if the principal service (hostel accommodation) were exempt. However, since the hostel accommodation is taxable, the composite supply, including food services, is also taxable. The judgment applied Section 8 of the CGST Act, which states that the tax rate for a composite supply is determined by the principal supply's tax rate. Consequently, the composite supply, with hostel accommodation as the principal service, is taxable at 18%.4. Admissibility of Certain Questions Under Section 97(2) of the GST Act:The judgment also considered the admissibility of the Applicant's questions under Section 97(2) of the CGST/TNGST Act. It was determined that only Questions 1 to 4 fell within the scope of Section 97(2)(a), (b), & (f), making the application admissible for these questions. However, no ruling was issued for Question No. 4, as it did not fall under the specified scope of Section 97(2).Ruling:- The services by way of providing hostel accommodation are not eligible for exemption under the specified notifications.- The supply of hostel accommodation services falls under Tariff heading 9963 and is taxable at 9% CGST + 9% SGST.- The supply of in-house food to hostel inmates is part of a composite supply, taxable at 18%.- No ruling was issued for Question No. 4 due to its inadmissibility under Section 97(2).