Hostel accommodation services for students and working women taxable at 18% GST, not exempt as residential dwellings

AAR Tamil Nadu ruled that hostel accommodation services provided to students and working women do not qualify for GST exemption under residential dwelling provisions. The authority held that hostels are not equivalent to residential dwellings and distinguished them from temporary accommodation like hotels. Hostel services are taxable at 18% GST (9% CGST + 9% SGST) under tariff heading 9963. When food and other services are bundled with accommodation as composite supply, the principal service (accommodation) tax rate of 18% applies to the entire package. The applicant must register for GST if turnover exceeds twenty lakh rupees annually.

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Issues Involved:

1. Eligibility for GST exemption on hostel accommodation services.
2. Requirement for GST registration based on turnover.
3. Taxability and applicable GST rate for hostel accommodation services.
4. Tax treatment of in-house food supply as part of hostel services.
5. Scope of Section 97(2) of the GST Act regarding the applicant's query.

Detailed Analysis:

1. Eligibility for GST Exemption on Hostel Accommodation Services:

The primary issue is whether the hostel accommodation provided by the applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and similar provisions under the TNGST Act. The term "residential dwelling" is not defined in the GST Act, but under the previous service tax regime, it was interpreted as any residential accommodation excluding temporary stay facilities like hotels or hostels. The Authority concluded that the applicant's hostel, which offers accommodation on a per-bed basis with additional services, does not qualify as a "residential dwelling for use as residence." The setup is more akin to a commercial establishment than a residential dwelling, and thus, the exemption does not apply.

2. Requirement for GST Registration Based on Turnover:

The applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The services provided by the applicant fall under the definition of "supply" as per Section 7(1)(a) of the CGST Act, and since they are providing taxable services, registration is mandatory upon crossing the specified turnover threshold.

3. Taxability and Applicable GST Rate for Hostel Accommodation Services:

The supply of hostel accommodation services falls under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The applicable GST rate is 9% CGST plus 9% SGST, totaling 18%, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The Authority distinguished hostel services from hotel services, noting that hostels provide longer-term accommodation with basic facilities, unlike hotels.

4. Tax Treatment of In-House Food Supply as Part of Hostel Services:

The supply of in-house food, when provided as part of hostel services, constitutes a composite supply. According to Section 2(30) of the GST Act, a composite supply involves two or more supplies naturally bundled together, with one being the principal supply. In this case, the principal supply is hostel accommodation, which is taxable at 18%. As such, the composite supply, including food services, is also taxed at 18%.

5. Scope of Section 97(2) of the GST Act Regarding the Applicant's Query:

The fifth question posed by the applicant does not fall within the scope of Section 97(2) of the GST Act, which outlines the matters on which advance rulings can be sought. Therefore, no ruling was issued for this question.

Ruling:

1. The hostel accommodation services provided by the applicant are not exempt under the specified GST notifications.
2. The applicant must register for GST in Tamil Nadu if their turnover exceeds twenty lakh rupees.
3. Hostel accommodation services are taxable at 18% GST.
4. The supply of in-house food is part of a composite supply taxable at 18%.
5. No ruling was provided for the fifth question as it was outside the scope of Section 97(2).

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