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. The authority determined that hostels differ from residential dwellings as they provide temporary accommodation rather than permanent residence. Consequently, 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 GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) for hostel accommodation.
2. Requirement for GST registration based on turnover.
3. Applicable GST tariff heading and rate for hostel accommodation services.
4. Taxability of in-house food supply as part of a composite supply.
5. Scope of ruling under Section 97(2) of the GST Act.

Issue-wise Detailed Analysis:

1. Eligibility for GST Exemption:

The primary issue was whether the hostel accommodation provided by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate), which exempts "services by way of renting of residential dwelling for use as residence." The judgment highlighted that the term "residential dwelling" is not defined in the CGST Act, but traditionally refers to a place used as a home. Hostels, providing temporary lodging, do not fit this definition. The ruling emphasized that the hostel's nature as a commercial establishment, providing accommodation and ancillary services for a fee, does not qualify as "residential dwelling for use as residence." Thus, the Applicant's services are not eligible for the exemption.

2. Requirement for GST Registration:

The judgment clarified that since the Applicant's services do not qualify for exemption, they must register for GST if their annual turnover exceeds twenty lakh rupees, as per Section 22 of the GST Acts. The provision mandates registration for suppliers of taxable services exceeding the specified turnover threshold.

3. Applicable GST Tariff Heading and Rate:

The ruling determined that the hostel accommodation services fall under Tariff heading 9963, which covers "Accommodation, food and beverage services." The applicable GST rate is 9% CGST + 9% SGST, totaling 18%, under Sl.No. 7(vi) of Notification No. 11/2017, as amended. The judgment distinguished hostel services from hotel accommodations, noting the longer duration and basic facilities typical of hostels.

4. Taxability of In-house Food Supply:

The judgment addressed whether the supply of in-house food to hostel inmates constitutes a composite supply. It concluded that the Applicant provides a composite supply, where the principal service is hostel accommodation, which is taxable at 18%. The provision of food and other services is considered ancillary to the main service, thus attracting the same tax rate as the principal supply.

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

The judgment noted that the fifth question posed by the Applicant did not fall within the scope of Section 97(2) of the GST Act, which outlines the matters on which advance rulings can be sought. Consequently, no ruling was issued for this question.

Ruling:

The judgment concluded that the Applicant's hostel accommodation services are not exempt under the specified GST notifications. The Applicant must register for GST if their turnover exceeds the threshold, and the services are taxable at 18%. The supply of in-house food is part of a composite supply, attracting the same tax rate. No ruling was provided for the fifth question as it was outside the scope of Section 97(2).

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