Hostel accommodation services for students and working women don't qualify for GST exemption as residential dwellings
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 notification. The authority held that hostels constitute business accommodation services rather than residential dwellings, requiring GST registration if turnover exceeds twenty lakh rupees annually. Hostel accommodation services are taxable at 18% GST under tariff heading 9963 as composite supply, with food and other ancillary services bundled together at the principal supply rate.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
- Whether the hostel accommodation extended by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and the identical Notification under the TNGST Act, 2017.
- Whether the Applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees.
- The applicable tariff heading and rate of tax for the supply of hostel accommodation services.
- Whether the incidental activity of supplying in-house food to hostel inmates is exempt as a composite supply.
- Whether the Applicant's question falls under the scope of Section 97(2) of the GST Act.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Exemption under Entry 12 of Exemption Notification No. 12/2017
- Relevant Legal Framework and Precedents: Entry 12 of 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.
- Court's Interpretation and Reasoning: The court interpreted "residential dwelling" in normal trade parlance, excluding establishments like hotels or hostels meant for temporary stay. It found that the Applicant's hostel accommodation does not qualify as a "residential dwelling" as it provides temporary lodging with additional services.
- Key Evidence and Findings: The Applicant provides accommodation with ancillary services, charges are per bed, and the premises are licensed as a hostel under various regulatory frameworks, indicating its commercial nature.
- Application of Law to Facts: The court concluded that the Applicant's hostel does not meet the criteria for a "residential dwelling" for use as residence, thus not qualifying for the exemption.
- Treatment of Competing Arguments: The Applicant's reliance on the Karnataka High Court decision was noted, but the court highlighted the pending appeal in the Supreme Court and the non-applicability of cited precedents.
- Conclusions: The hostel accommodation does not qualify for the exemption under Entry 12 of the Notification.
Issue 2: Requirement for GST Registration
- Relevant Legal Framework: Section 22 of the GST Act mandates registration for suppliers whose aggregate turnover exceeds twenty lakh rupees.
- Application of Law to Facts: As the Applicant's service is not exempt, it constitutes a taxable supply, requiring registration if turnover exceeds the threshold.
- Conclusions: The Applicant must register under the GST Act if their turnover exceeds twenty lakh rupees.
Issue 3: Tariff Heading and Rate of Tax
- Relevant Legal Framework: Notification No. 11/2017, Central Tax (Rate) specifies tax rates for different services under Heading 9963.
- Application of Law to Facts: The court determined that hostel accommodation services fall under Heading 9963 and are taxable at 9% CGST + 9% SGST.
- Conclusions: The supply of hostel accommodation services is taxable at 18% under the specified tariff heading.
Issue 4: Composite Supply of In-House Food
- Relevant Legal Framework: Section 2(30) of the GST Act defines "composite supply," and Section 8 determines the tax rate based on the principal supply.
- Application of Law to Facts: The court found the supply of in-house food to be part of a composite supply with hostel accommodation as the principal 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) of the GST Act
- Conclusions: The court did not issue a ruling on this question as it does not fall within the scope of Section 97(2).
3. SIGNIFICANT HOLDINGS
- Exemption Inapplicability: "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 Determination: "The supply of services by way of providing hostel accommodation falls under Tariff heading 9963 and is taxable @ 9% CGST + 9% SGST."
- Composite Supply Taxation: "The activity of supply of in-house food to the inmates of the hostel amounts to providing services in a composite manner...taxable @ 18%."
The judgment clarifies the non-eligibility of hostel accommodations for GST exemption under the specified notification, mandates registration based on turnover, and determines the applicable tax rates for the services provided by the Applicant.
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