Hostel accommodation services don't qualify for GST exemption under residential dwelling provisions, taxable at 18%

The Authority for Advance Ruling, Tamil Nadu held that hostel accommodation services do not qualify for GST exemption under residential dwelling provisions. The AAR distinguished hostels from residential dwellings, noting they are meant for temporary stays rather than permanent residence. 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% tax rate applicable to the principal supply of accommodation services.

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Issues Involved:

1. Eligibility for GST exemption for 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 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 GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and similar entries. The judgment clarified that the term "residential dwelling" is not defined in the CGST Act, but traditionally, it refers to a place used as a home. Hostels, which provide temporary lodging, do not fit this definition. The court emphasized that hostels are commercial establishments, not residential dwellings. Therefore, the services provided by the applicant do not qualify for the exemption intended for residential dwellings used as residences.

2. Requirement for GST Registration:

The judgment stated that since the hostel accommodation service is not exempt, the applicant must register for GST if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the GST Act. The service provided is considered a "supply" under Section 7(1)(a) of the CGST Act, necessitating registration.

3. Taxability and Applicable GST Rate:

The court determined that hostel accommodation services fall under Tariff heading 9963, which is taxable at 9% CGST and 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The decision distinguished hostel services from hotel accommodations, noting that hostels are for longer stays with basic facilities, unlike hotels.

4. Tax Treatment of In-house Food Supply:

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

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

The court did not issue a ruling on the fifth question raised by the applicant, as it did not fall within the scope of Section 97(2) of the GST Act. The section outlines specific areas where advance rulings can be sought, and the question posed did not meet these criteria.

Ruling:

1. Hostel accommodation services are not eligible for GST exemption under the specified notifications.
2. The applicant must register for GST if turnover exceeds twenty lakh rupees annually.
3. Hostel accommodation services are taxable at 9% CGST and 9% SGST.
4. In-house food supply is part of a composite supply, taxable at 18%.
5. No ruling issued for the fifth question due to scope limitations.

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