Hostel accommodation services to students and working women are taxable business supplies, not exempt residential dwellings under GST Entry 12

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. The accommodation constitutes taxable business supply requiring registration if turnover exceeds Rs. 20 lakh annually. Services fall under tariff heading 9963, taxable at 18% GST (9% CGST + 9% SGST). In-house food supply forms composite supply with accommodation as principal service, attracting 18% tax rate on entire bundled service.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the hostel accommodation extended by the Applicant qualifies for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017.
• Whether the Applicant is required to register under the GST Enactments 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 part of a composite supply.
• Other questions raised by the Applicant that do not fall under 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 a residential dwelling for use as a residence. The term "residential dwelling" is not specifically defined in the CGST Act.
• Court's Interpretation and Reasoning: The court observed that a "residential dwelling" typically refers to a place used as a home, which does not include hostels. Hostels provide temporary lodging and are more akin to commercial accommodations.
• Key Evidence and Findings: The Applicant's hostel is registered under various regulations applicable to commercial establishments, not residential dwellings.
• Application of Law to Facts: The Applicant's hostel does not qualify as a residential dwelling for use as a residence, thus not eligible for the exemption.
• Treatment of Competing Arguments: The Applicant relied on precedents and zoning regulations, which the court found inapplicable as they do not determine the nature of the property for GST purposes.
• Conclusions: The services provided by the Applicant are not eligible for exemption under the specified entry.

Issue 2: Requirement for GST Registration

• Relevant Legal Framework: Section 22 of the CGST Act mandates registration for suppliers with an aggregate turnover exceeding twenty lakh rupees.
• Court's Interpretation and Reasoning: The hostel services constitute a business activity, and thus, the Applicant must register if the turnover threshold is exceeded.
• Conclusions: The Applicant is required to register under GST if their turnover exceeds the specified limit.

Issue 3: Tariff Heading and Tax Rate

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

Issue 4: Composite Supply of In-house Food

• Relevant Legal Framework: Section 2(30) of the GST Act defines composite supply.
• Court's Interpretation and Reasoning: The supply of food is part of a composite supply, with hostel accommodation as the principal supply.
• Conclusions: The tax rate for the composite supply is 18%, corresponding to the principal supply of hostel accommodation.

Issue 5: Scope of Section 97(2)

• Court's Interpretation and Reasoning: Certain questions raised by the Applicant do not fall within the scope of Section 97(2) and thus no ruling is issued.

3. SIGNIFICANT HOLDINGS

• Exemption Ineligibility: "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 must register under GST if their turnover 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 Tax Rate: The composite supply of hostel accommodation and food is taxed at 18%.
• No Ruling on Certain Questions: No ruling is issued for questions outside the scope of Section 97(2).

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