2023 (8) TMI 1563 - AAR - GST

Hostel accommodation services not exempt from GST, taxable at 18% as not residential dwellings

IN RE : Tvl. Senora Ladies Hostel

IN RE : Tvl. Senora Ladies Hostel - TMI Issues Involved:1. Eligibility for GST exemption on hostel accommodation services.2. Applicable tariff heading and tax rate for hostel accommodation services.3. Taxability of in-house food supply as a composite service.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 GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and the corresponding TNGST notification. The relevant entry exempts services by way of renting a residential dwelling for use as a residence. The term 'residential dwelling' is not defined in the CGST Act, but under the erstwhile service tax regime, it was interpreted as any residential accommodation excluding temporary stay facilities like hotels and hostels. The judgment found that the applicant's hostel accommodation, which includes amenities like food and housekeeping, does not qualify as a 'residential dwelling' as it is more akin to a commercial establishment providing temporary lodging. Therefore, the services supplied by the applicant are not eligible for exemption under the said notification.2. Applicable Tariff Heading and Tax Rate for Hostel Accommodation Services:The judgment addressed the tariff heading and tax rate applicable to the applicant's hostel services. It was determined that the supply of hostel accommodation falls under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The applicable tax rate for such services is 9% CGST and 9% SGST under Sl. No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended by Notification No. 20/2019. This classification reflects the nature of hostel services as distinct from hotel accommodations, which are typically for shorter stays and have different facilities.3. Taxability of In-house Food Supply as a Composite Service:The judgment examined whether the supply of in-house food to hostel inmates is exempt as part of a composite supply. It was concluded that the provision of food, along with accommodation and other services, constitutes a composite supply, with the principal supply being accommodation services. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply applies to the entire composite supply. Consequently, the composite supply, including in-house food, is taxable at 18%, which is the rate for the principal supply of hostel accommodation services.4. Admissibility of Certain Questions Under Section 97(2) of the GST Act:The judgment noted that certain questions posed by the applicant 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. As such, no ruling was issued on these questions.Ruling:- The hostel accommodation services provided by the applicant are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).- 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 as part of a composite service is taxable at 18%.- No ruling was issued for questions outside the scope of Section 97(2) of the GST Act.