Hostel accommodation services for students and working women don't qualify for GST exemption under Entry 12 of Notification 12/2017

AAR Tamil Nadu ruled that hostel accommodation services provided to students and working women do not qualify as "residential dwelling for use as residence" under GST exemption Entry 12 of Notification 12/2017. The applicant must register if turnover exceeds Rs. 20 lakh annually. Hostel accommodation services fall under tariff heading 9963, taxable at 18% GST (9% CGST + 9% SGST). Food and other services provided constitute composite supply with hostel accommodation as principal supply, attracting 18% tax rate on the entire bundle.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in the judgment are:

• Whether the hostel accommodation provided by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and similar entries under the TNGST Act, 2017.
• Whether the Applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year.
• What is the applicable tariff heading and rate of tax for the supply of hostel accommodation services by the ApplicantRs.
• Whether the supply of in-house food to hostel inmates is exempt as part of a composite supply.
• Whether the fifth question posed by the Applicant falls within the scope of Section 97(2) of the GST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Exemption Eligibility under Entry 12

• Relevant Legal Framework and Precedents: Entry 12 of Exemption Notification No. 12/2017-CT (Rate) exempts services by way of renting of residential dwelling for use as residence. The term "residential dwelling" is not defined under the CGST Act, 2017.
• Court's Interpretation and Reasoning: The court interpreted "residential dwelling" as a place where people reside as a home, which does not include hostels providing temporary lodging.
• Key Evidence and Findings: The Applicant provides hostel accommodation with ancillary services, charging per bed, which does not constitute a residential dwelling.
• Application of Law to Facts: The court concluded that the Applicant's hostel does not qualify as a residential dwelling for use as residence, thus not eligible for the exemption.
• Treatment of Competing Arguments: The Applicant's reliance on the Karnataka High Court decision was noted, but the pending appeal in the Supreme Court and the absence of a landlord-tenant relationship were decisive.
• Conclusions: The hostel accommodation is not eligible for exemption under Entry 12.

Issue 2: Requirement for GST Registration

• Relevant Legal Framework and Precedents: Section 22 of the GST Act mandates registration for suppliers with an aggregate turnover exceeding twenty lakh rupees.
• Court's Interpretation and Reasoning: The Applicant's services are considered a taxable supply, necessitating registration if turnover exceeds the threshold.
• Conclusions: The Applicant must register under the GST Act if their turnover exceeds twenty lakh rupees.

Issue 3: Applicable Tax Rate and Tariff Heading

• Relevant Legal Framework and Precedents: Notification No. 11/2017, Central Tax (Rate) specifies tax rates for accommodation services.
• Court's Interpretation and Reasoning: Hostel services fall under Tariff heading 9963, taxable at 9% CGST + 9% SGST.
• Conclusions: The applicable tax rate for hostel accommodation services is 18% under the specified tariff heading.

Issue 4: Composite Supply and Taxability

• Relevant Legal Framework and Precedents: Section 2(30) of the GST Act defines composite supply.
• Court's Interpretation and Reasoning: The supply of food is ancillary to the principal service of accommodation, making it a composite supply.
• Conclusions: The composite supply is taxable at the rate applicable to the principal supply, which is 18%.

Issue 5: Scope of Section 97(2)

• Conclusions: The fifth question does not fall within the scope of Section 97(2) of the GST Act, and no ruling is issued.

3. SIGNIFICANT HOLDINGS

• Exemption Eligibility: "The services by way of providing hostel accommodation supplied by the Applicant are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017."
• Registration Requirement: "The Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees."
• Tax Rate and Tariff Heading: "The supply of services by way of providing hostel accommodation falls under Tariff heading 9963 and is taxable @ 9% CGST + 9% SGST under Sl.No. 7(vi) of the Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017."
• Composite Supply Taxability: "The hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, is the tax rate for the composite supply provided by them."
• Scope of Section 97(2): "No ruling is issued, as the question put forth by the applicant does not fall under the scope of Section 97(2) of the GST Act."

---