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 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 as a composite supply, the entire package attracts 18% GST rate applicable to the principal supply of accommodation services.

---

---

Issues Involved:

1. Eligibility for GST exemption on hostel accommodation under specific exemption notifications.
2. Requirement for GST registration based on turnover.
3. Taxability and applicable GST rate for hostel accommodation services.
4. Tax treatment of in-house food supply as part of a composite supply.
5. Admissibility of certain questions under the scope of Section 97(2) of the GST Act.

Issue-wise Detailed Analysis:

1. Eligibility for GST Exemption:

The primary issue is whether the hostel accommodation provided by the applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and similar notifications. The exemption applies to "services by way of renting of residential dwelling for use as residence." The term "residential dwelling" is not explicitly defined in the CGST Act, but the common understanding excludes establishments like hotels or hostels. The ruling determined that the applicant's hostel does not qualify as a "residential dwelling" because it provides temporary accommodation similar to hotels, with additional services like food and housekeeping. Therefore, the exemption is not applicable.

2. Requirement for GST Registration:

The applicant is required to register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. The hostel accommodation services provided by the applicant are considered a taxable supply under Section 7(1)(a) of the CGST Act, 2017, and thus, the applicant must comply with the registration requirements under Section 22 of the GST Acts.

3. Taxability and Applicable GST Rate:

The supply of hostel accommodation services falls under Tariff heading 9963, which pertains to "Accommodation, food and beverage services." The applicable GST rate is 9% CGST plus 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended. The ruling clarifies that hostel services cannot be equated to hotel accommodation, and therefore, the specified GST rate applies.

4. Tax Treatment of In-house Food Supply:

The in-house food supply to hostel inmates is considered part of a composite supply, where the principal supply is the hostel accommodation service. According to Section 2(30) of the GST Act, a composite supply involves two or more taxable supplies that are naturally bundled. Since the principal supply (hostel accommodation) is taxable at 18%, the same rate applies to the composite supply, including the food services.

5. Admissibility of Certain Questions:

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 is issued for this question.

Ruling Summary:

- Hostel accommodation services are not exempt under the specified notifications.
- The applicant must register for GST if turnover exceeds twenty lakh rupees.
- Hostel accommodation services are taxable at 9% CGST + 9% SGST.
- The composite supply, including in-house food, is taxable at 18%.
- No ruling on the fifth question due to its inadmissibility under Section 97(2).

---