Hostel accommodation services for students and working women taxable at 18% GST, not exempt as residential dwelling

The AAR Tamil Nadu ruled that hostel accommodation services provided to students and working women do not qualify for GST exemption as "residential dwelling for use as residence." The authority held that hostels are not equivalent to residential accommodation and differ from hotels in duration and facilities. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST) under tariff heading 9963. When food and other services are bundled with accommodation at a single price, it constitutes a composite supply taxable at the principal service rate of 18%. The applicant must register for GST if turnover exceeds twenty lakh rupees annually.

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Issues Involved:

1. Eligibility for GST exemption on hostel accommodation under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. Requirement for GST registration for the applicant.
3. Applicable tariff heading and tax rate for hostel accommodation services.
4. Taxability of supply of in-house food to hostel inmates as 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). The judgment emphasized that the term "residential dwelling" is not explicitly defined in the CGST Act. However, based on the erstwhile service tax law and common understanding, a residential dwelling is typically a place where people reside as a home, without including amenities like food or housekeeping, which are characteristic of hostels. The applicant's hostel, offering accommodation on a per-bed basis with additional services, does not qualify as a "residential dwelling" for use as a residence. The judgment also noted that hostels are considered commercial establishments under various regulatory provisions in Tamil Nadu. Consequently, the services provided by the applicant do not meet the exemption criteria, as hostels are not equivalent to residential accommodations.

2. Requirement for GST Registration:

The judgment concluded that the applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year. The provision of hostel accommodation services is considered a taxable supply under Section 7(1)(a) of the CGST Act, 2017, and therefore, the applicant must comply with the registration requirements stipulated in Section 22 of the GST Act.

3. Applicable Tariff Heading and Tax Rate:

The judgment determined that the supply of hostel accommodation services falls under Tariff heading 9963. It is taxable at the rate of 9% CGST and 9% SGST, as specified under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 20/2019 Central Tax (Rate) dated 30.09.2019. The judgment clarified that hostel services, which are distinct from hotel accommodations, are subject to this tax rate.

4. Taxability of In-House Food Supply:

The judgment addressed the taxability of supplying in-house food to hostel inmates. It was determined that the provision of food, along with accommodation and other services, constitutes a composite supply. According to Section 8 of the CGST Act, 2017, the tax rate applicable to the principal supply (hostel accommodation services) applies to the entire composite supply. Therefore, the tax rate for the composite supply, including in-house food, is 18%.

5. Scope of Ruling:

The judgment noted that no ruling could be issued for the fifth question raised by the applicant, as it did not fall within the scope of Section 97(2) of the GST Act. The scope of advance ruling is limited to specific questions outlined in the Act, and the applicant's fifth question did not meet these criteria.

Ruling Summary:

- The hostel accommodation services provided by the applicant are not exempt from GST under the specified exemption notifications.
- The applicant must register for GST if their turnover exceeds the specified threshold.
- 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 and is taxed at the rate applicable to the principal supply.
- No ruling was issued for the fifth question, as it was outside the scope of Section 97(2) of the GST Act.

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