Hostel accommodation services not exempt from GST, taxable at 18% as temporary accommodation similar to hotels

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 accommodation as they are temporary accommodations similar to hotels, motels, or guest houses. The applicant must register for GST if turnover exceeds twenty lakh rupees. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST). When food and other services are bundled with accommodation at a single price, it constitutes a composite supply taxable at the principal supply rate of 18%.

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Issues Involved:

1. Eligibility for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) for hostel accommodation.
2. Requirement for GST registration for the applicant.
3. Applicable tariff heading and tax rate for hostel accommodation services.
4. Taxability of in-house food supply to hostel inmates as a composite supply.
5. Admissibility of a question under Section 97(2) of the GST Act.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption:

The primary issue was 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 judgment clarified that the term "residential dwelling" is not defined under the CGST Act, but in trade parlance, it refers to a place where people reside as a home, excluding places meant for temporary stay like hotels or hostels. The ruling emphasized that hostels provide temporary lodging and are not equivalent to residential dwellings. The applicant's hostel, being a commercial establishment with additional services like food and housekeeping, does not qualify for the exemption.

2. Requirement for GST Registration:

The judgment stated that the applicant is required to register under GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. The provision of hostel accommodation services constitutes a taxable supply under Section 7(1)(a) of the CGST Act, making registration mandatory if the turnover threshold is crossed.

3. Applicable Tariff Heading and Tax Rate:

The services provided by the applicant fall under Tariff heading 9963, which pertains to accommodation, food, and beverage services. The ruling specified that hostel accommodation services are taxable at 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, as amended. The judgment differentiated hostel services from hotel accommodations, emphasizing that hostels are for longer stays with basic facilities, unlike hotels.

4. Taxability of In-house Food Supply:

The supply of in-house food to hostel inmates is considered part of a composite supply, where the principal supply is hostel accommodation. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply applies to the entire composite supply. Thus, the composite supply, including food services, is taxable at 18%, aligning with the tax rate for hostel accommodation.

5. Admissibility of a Question:

The judgment noted that the fifth question raised by the applicant does not fall within the scope of Section 97(2) of the GST Act, and therefore, no ruling was issued on that question. The section outlines the specific questions on which advance rulings can be sought, and the applicant's question did not meet these criteria.

Ruling Summary:

- The applicant's hostel accommodation services are not exempt under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
- Registration under GST is required if the turnover exceeds twenty lakh rupees.
- Hostel accommodation services are taxable at 18% (9% CGST + 9% SGST).
- In-house food supply is part of a composite supply taxable at 18%.
- No ruling on the fifth question due to its inadmissibility under Section 97(2) of the GST Act.

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