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

The 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 accommodations like hotels. The applicant must register for GST if turnover exceeds Rs. 20 lakh. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST). When food and other services are bundled with accommodation at a single price, it constitutes a composite supply taxable at the principal supply rate of 18%.

---

---

Issues Involved:

1. Eligibility for GST exemption on hostel accommodation under specific exemption notifications.
2. Requirement for GST registration based on turnover.
3. Taxability and tariff classification of hostel accommodation services.
4. Tax implications of supplying in-house food as part of hostel services.
5. Applicability of a specific question under the scope of Section 97(2) of the GST Act.

Detailed Analysis:

1. Eligibility for GST Exemption:

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) and its identical provisions under the TNGST Act. The term "residential dwelling" is not defined in the CGST Act, but previous interpretations under service tax law exclude temporary accommodations like hostels. The judgment emphasized that the Applicant's hostel services, which include ancillary services like food and housekeeping, do not meet the criteria of "residential dwelling for use as residence." The ruling concluded that the hostel accommodation is a commercial service and not eligible for the claimed exemption.

2. Requirement for GST Registration:

The Applicant's services were deemed to fall within the definition of "supply" under Section 7 of the CGST Act, as they are provided for consideration and constitute a business activity. Consequently, if the Applicant's aggregate turnover exceeds twenty lakh rupees in a financial year, they are required to register for GST as per Section 22 of the CGST Act.

3. Taxability and Tariff Classification:

The supply of hostel accommodation services by the Applicant falls under Tariff heading 9963, classified as "Accommodation, food and beverage services." The applicable GST rate is 9% CGST + 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment clarified that hostel services, due to their nature and duration, differ from hotel accommodations and are taxed accordingly.

4. Tax Implications of Supplying In-House Food:

The supply of in-house food, along with accommodation, is considered a composite supply where the principal supply is the hostel accommodation. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply (hostel accommodation) applies to the entire composite supply. Therefore, the composite supply, including food services, is taxable at 18%.

5. Applicability of a Specific Question:

The fifth question raised by the Applicant was not addressed with a ruling, as it did not fall within the scope of Section 97(2) of the GST Act, which outlines the matters on which advance rulings can be sought.

Ruling:

- The Applicant's hostel accommodation services are not exempt from GST under the specified notifications.
- The Applicant must register for GST if their turnover exceeds the threshold.
- Hostel accommodation services are taxable at 18% GST.
- The supply of in-house food is part of a composite supply taxable at 18%.
- No ruling was issued for the fifth question as it was outside the scope of the Act.

---