Hostel accommodation services don't qualify for GST exemption under residential dwelling provisions, taxable at 18%

The AAR, Tamil Nadu ruled that hostel accommodation services do not qualify for GST exemption under residential dwelling provisions. The Authority held that hostels are not equivalent to residential dwellings and are not rented for use as residence, requiring strict interpretation of exemption notifications. The Applicant must obtain GST registration if turnover exceeds twenty lakh rupees. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST) under composite supply provisions, where food and other ancillary services are bundled with the principal accommodation service at a consolidated rate.

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Issues Involved:

1. Eligibility for GST exemption on hostel accommodation services.
2. Requirement for GST registration based on turnover.
3. Applicable GST rate for hostel accommodation services.
4. Taxability of in-house food supply as part of composite supply.
5. Scope of advance ruling under Section 97(2) of the GST Act.

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 defined in the CGST Act, but generally refers to a place where people reside as a home. The Authority found that the hostel, which provides accommodation to students and working women, does not fit this definition as it offers temporary lodging with additional services such as food and housekeeping. The premises are rented out on a per-bed basis, indicating a commercial activity rather than residential dwelling. Therefore, the services provided by the applicant do not qualify for the exemption.

2. Requirement for GST registration based on turnover:

The applicant's service of providing hostel accommodation is considered a taxable supply under the GST Act. As per Section 22 of the GST Act, any supplier whose aggregate turnover exceeds twenty lakh rupees in a financial year is required to register for GST. Since the applicant's services do not qualify for exemption, they are required to register if their turnover exceeds this threshold.

3. Applicable GST rate for hostel accommodation services:

The Authority determined that the supply of hostel accommodation services falls under Tariff heading 9963, which pertains to "Accommodation, food and beverage services." According to Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended, these services are taxable at 9% CGST + 9% SGST. The Authority clarified that hostel services, which are for longer-term stays and provide basic facilities, cannot be equated with hotel accommodations, which are typically for short-term stays and offer more amenities.

4. Taxability of in-house food supply as part of composite supply:

The applicant provides food and other services along with accommodation, which constitutes a composite supply under Section 2(30) of the GST Act. In a composite supply, the tax rate applicable to the principal supply applies to the entire supply. Since the principal supply is hostel accommodation, which is taxable at 18%, the same rate applies to the composite supply, including the in-house food services.

5. Scope of advance ruling under Section 97(2) of the GST Act:

The fifth question posed by the applicant was not addressed as it did not fall within the scope of Section 97(2) of the GST Act, which outlines the specific matters on which an advance ruling can be sought. As such, no ruling was issued for this question.

Ruling Summary:

1. Hostel accommodation services provided by the applicant are not exempt from GST.
2. The applicant must register for GST if their turnover exceeds twenty lakh rupees.
3. Hostel accommodation services are taxable at 18% (9% CGST + 9% SGST).
4. In-house food supply is part of a composite supply and is taxable at 18%.
5. No ruling was issued for the fifth question as it was outside the scope of the Act.

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