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 hostels are not equivalent to residential dwellings and are not rented for use as residence, requiring strict interpretation of exemption notifications. The applicant must register for GST if turnover exceeds twenty lakh rupees. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST) under composite supply provisions, with accommodation being the principal supply despite bundled food and other services being charged consolidatedly.

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Issues Involved:

1. Eligibility for GST exemption for hostel accommodation under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
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 to hostel inmates as a composite supply.
5. Scope of ruling under Section 97(2) of the GST Act.

Detailed Analysis:

1. Eligibility for GST Exemption:

The primary issue is whether the hostel accommodation provided by the applicant qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate), which pertains to "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 previous service tax laws, it referred to residential accommodation excluding hotels, motels, inns, guest houses, etc. The ruling determined that the applicant's hostel does not qualify as a "residential dwelling" because it provides temporary lodging with additional services like food and housekeeping, and is more akin to a commercial establishment. Therefore, the applicant's services do not fall under the exemption and are subject to GST.

2. Requirement for GST Registration:

Since the hostel accommodation service is not exempt, the applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. This is in accordance with Section 22 of the CGST Act, which mandates registration for suppliers of taxable goods or services exceeding the specified turnover threshold.

3. Applicable GST Rate and Tariff Heading:

The ruling addressed the applicable GST rate for hostel accommodation services. The services fall under Tariff heading 9963 (Accommodation, food, and beverage services) and are taxable at 9% CGST + 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The ruling clarified that hostel services, being different from hotel accommodations, are subject to this rate.

4. Taxability of In-house Food Supply as Composite Supply:

The applicant provides in-house food along with accommodation services, which constitutes a composite supply as defined under Section 2(30) of the GST Act. The principal supply is hostel accommodation, which is taxable at 18%. Therefore, the entire composite supply, including food services, is taxed at this rate.

5. Scope of Ruling Under Section 97(2):

The ruling did not address the fifth question posed by the applicant, as it did not fall under the scope of Section 97(2) of the GST Act, which outlines the specific matters on which an advance ruling can be sought.

Ruling Summary:

- The hostel accommodation services provided by the applicant are not exempt under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
- The applicant must register for GST in Tamil Nadu if their turnover exceeds twenty lakh rupees.
- The applicable GST rate for hostel accommodation services is 18% (9% CGST + 9% SGST).
- The supply of in-house food is part of a composite supply and taxed at 18%.
- No ruling was issued for the fifth question as it falls outside the scope of Section 97(2) of the GST Act.

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