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, as hostels are not equivalent to residential accommodation and fail to meet the twin conditions of being residential dwelling for use as residence. The applicant must register for GST if turnover exceeds Rs. 20 lakh. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST). 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 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 the supply of hostel accommodation services.
4. Taxability of incidental supply of in-house food as part of a composite supply.
5. Admissibility of certain questions under Section 97(2) of the GST Act.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption:
- The primary question 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 term "residential dwelling" is not defined under the CGST Act or the Notification, but previous interpretations under service tax law suggest it excludes temporary accommodations like hostels.
- The judgment emphasized that a "residential dwelling" typically involves a family or related persons using a space as a home, without additional services like food or housekeeping, which are characteristic of hostels.
- The Applicant's hostel, offering accommodations to students and working women on a per-bed basis with ancillary services, does not meet the criteria for a residential dwelling. Consequently, the exemption under Entry 12 is not applicable.

2. Requirement for GST Registration:
- Since the hostel accommodation does not qualify for exemption, the Applicant's services are considered a taxable supply. As per Section 22 of the GST Acts, any supplier of services with an aggregate turnover exceeding twenty lakh rupees in a financial year must register for GST.
- The Applicant is required to register under GST if their turnover surpasses this threshold.

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."
- As per Notification No. 11/2017, Central Tax (Rate), and its amendments, the supply of hostel accommodation services is taxable at 9% CGST and 9% SGST under Sl.No. 7(vi).

4. Taxability of Incidental Supply of In-house Food:
- The supply of in-house food is considered part of a composite supply, where the principal supply is the hostel accommodation service.
- According to Section 8 of the CGST Act, the tax rate for a composite supply is determined by the principal supply. Since hostel accommodation is taxable at 18%, this rate applies to the composite supply including food services.

5. Admissibility of Certain Questions:
- The fifth question posed by the Applicant did not fall within the scope of Section 97(2) of the GST Act, and therefore, no ruling was issued on it.

Ruling:

- The services of providing hostel accommodation are not eligible for the exemption under the specified notifications.
- The Applicant must register for GST if their turnover exceeds the specified limit.
- The applicable tax rate for hostel accommodation services is 18% (9% CGST + 9% SGST).
- The supply of in-house food is part of a composite supply with the same tax rate as the principal supply.
- No ruling was provided for the fifth question due to its inadmissibility under the GST Act provisions.

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