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

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 residential dwellings as they provide temporary accommodation similar to hotels/guest houses, not permanent residence. The applicant must register for GST if turnover exceeds Rs. 20 lakh. Hostel accommodation is taxable at 18% GST (9% CGST + 9% SGST). Where food and other services are bundled with accommodation at a single price, it constitutes composite supply taxable at the principal supply rate of 18%.

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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 and tariff heading 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 GST 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 term "residential dwelling" is not defined in the CGST Act, but under the erstwhile service tax law, it was interpreted as any residential accommodation excluding temporary stay facilities like hotels or hostels. The judgment concluded that the applicant's hostel accommodation does not qualify as a "residential dwelling" because it provides temporary lodging with additional services, akin to a commercial establishment rather than a residential dwelling. Therefore, the hostel accommodation is not eligible for the exemption.

2. Requirement for GST registration based on turnover:

The applicant is required to register under GST if the aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the CGST Act. The judgment held that since the hostel accommodation services are not exempt and qualify as a taxable supply, the applicant must register for GST if the turnover threshold is met.

3. Applicable GST rate and tariff heading 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 for such services is 9% CGST + 9% SGST, totaling 18%, under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended by Notification No. 20/2019 Central Tax (Rate).

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

The applicant provides in-house food along with accommodation, which constitutes a composite supply. As per Section 2(30) of the GST Act, a composite supply involves two or more supplies naturally bundled and supplied together, with one being the principal supply. The principal supply here is the hostel accommodation, which is taxable at 18%. Thus, the composite supply, including food services, is also taxable at the same rate.

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

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

Ruling:

1. Hostel accommodation services are not eligible for GST exemption under the specified notification entries.
2. The applicant must register for GST if the turnover exceeds the threshold.
3. Hostel accommodation services are taxable at 18% under the specified tariff heading.
4. In-house food supply as part of composite services is taxable at 18%.
5. No ruling issued for the fifth question due to its exclusion from the scope of Section 97(2).

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