2023 (8) TMI 1565 - AAR - GST

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

IN RE : Tvl. Thai Mookabikaa Ladies Hostel

IN RE : Tvl. Thai Mookabikaa Ladies Hostel - TMI Issues Involved:1. Eligibility for GST exemption on hostel accommodation services.2. Requirement for GST registration based on turnover.3. Applicable GST rate and tariff heading 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 certain queries.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. The notification exempts 'services by way of renting of residential dwelling for use as residence.' The judgment clarified that the term 'residential dwelling' is not defined under the CGST Act, but it generally refers to a place where people reside as a home. Hostels, being commercial establishments offering temporary lodging, do not qualify as residential dwellings. The judgment emphasized that hostels provide accommodations similar to hotels and are subject to various licenses and regulations applicable to commercial establishments. Consequently, the services provided by the applicant do not meet the criteria for exemption, as they are not considered 'residential dwelling for use as residence.'2. Requirement for GST Registration Based on Turnover:The judgment addressed the requirement for GST registration, stating that the applicant must register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The services provided by the applicant are classified as 'supply' under Section 7(1)(a) of the CGST Act, and therefore, they are subject to GST registration requirements if the turnover threshold is met.3. Applicable GST Rate and Tariff Heading for Hostel Accommodation Services:The judgment determined that the supply of hostel accommodation services falls under Tariff heading 9963, which pertains to 'Accommodation, food and beverage services.' The applicable GST rate for these services is 9% CGST plus 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended. The judgment clarified that hostel services cannot be equated to hotel accommodations, and therefore, the specific GST rate for hostel services applies.4. Tax Treatment of In-House Food Supply as Part of Hostel Services:The judgment examined whether the supply of in-house food to hostel inmates constitutes a composite supply. It was concluded that the provision of food, along with accommodation services, is a composite supply, with accommodation being the principal supply. As a result, the tax rate applicable to the principal supply (hostel accommodation) applies to the entire composite supply, which is taxable at 18%.5. Scope of Section 97(2) of the GST Act Regarding Certain Queries:The judgment noted that no ruling could be issued for the fifth question raised by the applicant, as it did not fall within the scope of Section 97(2) of the GST Act. This section outlines specific matters on which advance rulings can be sought, and the applicant's query did not pertain to those specified matters.Ruling:- The applicant's hostel accommodation services are not eligible for GST exemption under the specified notification entries.- The applicant is required to register for GST if their turnover exceeds twenty lakh rupees.- Hostel accommodation services are taxable at 18% (9% CGST + 9% SGST) under the relevant tariff heading.- The supply of in-house food as part of hostel services is treated as a composite supply, with the tax rate applicable to the principal supply.- No ruling was issued for the fifth question, as it was outside the scope of Section 97(2) of the GST Act.