Hostel accommodation services taxable at 18% GST, not exempt under residential dwelling provisions

The AAR Tamil Nadu held that hostel accommodation services do not qualify for GST exemption under residential dwelling provisions, as hostels are not equivalent to residential accommodation for use as residence. The ruling clarified that hostel accommodation is taxable at 18% GST (9% CGST + 9% SGST) under composite supply provisions, where accommodation is the principal service and food/other services are ancillary. The applicant must register for GST if turnover exceeds twenty lakh rupees annually, as hostel services constitute taxable supply in the course of business.

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Issues Involved:

1. Eligibility of hostel accommodation for GST exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. Requirement for GST registration based on turnover.
3. Applicable GST rate and tariff heading for hostel accommodation services.
4. Tax treatment of in-house food supply as part of hostel services.
5. Scope of ruling under Section 97(2) of the GST Act.

Issue-wise Detailed Analysis:

1. Eligibility of Hostel Accommodation for GST Exemption:

The primary question was whether the hostel accommodation provided by the applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate), which pertains to "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 GST Act, but based on trade parlance and previous service tax guidelines, it refers to accommodation that does not include temporary lodging like hotels or hostels. The judgment concluded that the applicant's hostel does not qualify as a "residential dwelling" because it provides temporary accommodation similar to hotels, with services like food and housekeeping, which are not typical of residential dwellings. Therefore, the hostel services are not eligible for GST exemption under the specified entry.

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, as per Section 22 of the GST Act. The judgment noted that the applicant's services constitute a "supply" under the GST Act, and since they do not qualify for exemption, they must comply with registration requirements if their turnover threshold is met.

3. Applicable GST Rate and Tariff Heading:

The judgment determined that 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 and 9% SGST, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment clarified that hostel services, being distinct from hotel accommodation, are taxed under this specific rate.

4. Tax Treatment of In-House Food Supply:

The judgment addressed the composite nature of the services provided by the applicant, which include accommodation and in-house food supply. It was determined that these services are naturally bundled, with accommodation being the principal supply. As per Section 8 of the CGST Act, the tax rate applicable to the principal supply (hostel accommodation) applies to the entire composite supply. Therefore, the composite service, including food, is taxed at the rate applicable to hostel accommodation, which is 18%.

5. Scope of Ruling Under Section 97(2) of the GST Act:

The judgment did not issue a ruling on the fifth question posed by the applicant, as it did not fall within the scope of Section 97(2) of the GST Act. This section outlines specific questions on which advance rulings can be sought, and the applicant's query did not align with these criteria.

Ruling:

- The hostel accommodation services provided by the applicant are not eligible for GST exemption under the specified notification entries.
- The applicant must register for GST if their turnover exceeds the prescribed threshold.
- Hostel accommodation services are taxable at 9% CGST and 9% SGST under the relevant tariff heading.
- The supply of in-house food as part of hostel services is a composite supply, taxable at 18%.
- No ruling was issued for the fifth question as it was outside the scope of Section 97(2).

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