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 hostel accommodation differs from residential dwelling as it's not rented for use as residence, distinguishing it from family/individual residential rentals. The applicant must register for GST if turnover exceeds Rs. 20 lakh. Hostel services are taxable at 18% GST (9% CGST + 9% SGST) under accommodation services category, not hotel rates. When food and other services are bundled with accommodation at a single consolidated 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 under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. Requirement for GST registration for the applicant.
3. Applicable GST rate for hostel accommodation services.
4. Taxability of in-house food supply as part of hostel services.
5. Scope of Section 97(2) of the GST Act regarding the applicant's query.

Issue-wise Detailed Analysis:

1. Eligibility for GST Exemption on Hostel Accommodation:

The primary issue is whether the hostel accommodation provided by the applicant qualifies as a "residential dwelling for use as residence" under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The term "residential dwelling" is not defined in the CGST Act. However, under the erstwhile service tax law, it was interpreted as residential accommodation excluding temporary stay facilities like hotels or hostels. The judgment highlights that a residential dwelling typically involves letting out a building or part thereof to a person or family for use as a home, without additional services like food or housekeeping. The applicant's service, involving renting out premises on a per-bed basis with ancillary services, is deemed more akin to commercial accommodation rather than residential dwelling. Thus, the exemption under Entry 12 is not applicable.

2. Requirement for GST Registration:

The applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The provision of hostel accommodation services is considered a business activity under Section 7(1)(a) of the CGST Act, thus constituting a "supply." Therefore, if the turnover threshold is met, registration is mandatory.

3. Applicable GST Rate for Hostel Accommodation Services:

The supply of hostel accommodation services falls under Tariff heading 9963. 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 distinguishes hostel services from hotel accommodations, emphasizing that hostels are used for longer stays with basic facilities, unlike hotels which offer temporary stays with extensive amenities.

4. Taxability of In-house Food Supply:

The provision of in-house food to hostel inmates is considered part of a composite supply, where the principal supply is hostel accommodation. Under Section 2(30) of the GST Act, composite supply involves two or more goods or services naturally bundled together. The tax rate for the composite supply is determined by the principal supply, which in this case is hostel accommodation taxable at 18%. Therefore, the entire composite supply, including food, is taxed at this rate.

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

The fifth question raised by the applicant does not fall within the scope of Section 97(2) of the GST Act, and thus, no ruling is issued on this matter. The section outlines specific issues on which advance rulings can be sought, and the applicant's query does not align with these specified issues.

Ruling:

1. Hostel accommodation services are not exempt under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. GST registration is required if the turnover exceeds twenty lakh rupees.
3. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST).
4. In-house food supply is part of a composite supply and taxed at 18%.
5. No ruling on the fifth question as it falls outside Section 97(2) of the GST Act.

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