2023 (9) TMI 1595 - AAR - GST

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

IN RE : Tvl. Udayam Ladies Hostel

IN RE : Tvl. Udayam Ladies Hostel - TMI 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. Taxability and applicable GST rate for hostel accommodation services.4. Tax treatment of composite supply involving in-house food services.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 as a 'residential dwelling for use as residence' under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The applicant argued that their hostel services should be exempt from GST as they provide residential accommodation to students and working women. However, the judgment concluded that the term 'residential dwelling' is not defined under the CGST Act, but based on common trade parlance and previous service tax guidelines, it refers to a place treated as a home, excluding temporary accommodations like hostels. The judgment emphasized that hostels provide temporary lodging, do not establish a landlord-tenant relationship, and are subject to regulatory provisions applicable to commercial establishments, not residential dwellings. Therefore, the services do not qualify for the exemption, and the applicant's reliance on certain case laws was deemed inapplicable.2. Requirement for GST Registration:The judgment determined that since the applicant's service of providing hostel accommodation is not exempt, they are required to register under GST if their aggregate turnover exceeds twenty lakh rupees in a financial year. This requirement aligns with Section 22 of the GST Act, which mandates registration for suppliers whose turnover surpasses the specified threshold.3. Taxability and Applicable GST Rate:The judgment analyzed the applicable GST rate for hostel accommodation services. It was concluded that these services fall under Tariff heading 9963, classified as 'Accommodation, food and beverage services.' The applicable GST rate is 9% CGST and 9% SGST, totaling 18%, as per Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended. The judgment distinguished hostel services from hotel accommodations, emphasizing that hostels are intended for longer stays with basic facilities, unlike hotels, which offer temporary lodging with extensive amenities.4. Tax Treatment of Composite Supply:The judgment addressed the issue of whether the supply of in-house food to hostel inmates constitutes a composite supply. It was determined that the applicant provides a composite supply, with the principal supply being hostel accommodation services. As per Section 8 of the CGST Act, the tax rate for the principal supply applies to the entire composite supply. Consequently, the composite supply, including food services, is taxable at 18%.5. Scope of Ruling under Section 97(2):The judgment clarified 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. This section outlines the specific matters on which advance rulings can be sought, and the applicant's question did not pertain to any of these specified matters.Ruling Summary:- 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 threshold.- Hostel accommodation services are taxable at 18% GST.- The supply of in-house food services is part of a composite supply and is taxed at 18%.- No ruling was issued for the fifth question as it was outside the scope of Section 97(2) of the GST Act.