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

Tamil Nadu AAR 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 accommodation constitutes taxable supply requiring registration if turnover exceeds twenty lakh rupees annually. Hostel services fall under tariff heading 9963, taxable at 18% GST (9% CGST + 9% SGST). In-house food supply to inmates 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 judgment addresses the following core legal questions:

• 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 under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No.09/2017-IT(Rate) dated 28.06.2017, as amended.
• Whether the Applicant is required to register under the GST Enactments if their aggregate turnover exceeds twenty lakh rupees in a financial year.
• What is the applicable tariff heading and rate of taxability for the supply of hostel accommodation servicesRs.
• Whether the incidental activity of supplying in-house food to the inmates of the hostel would also be exempt as a composite supply if hostel accommodation is considered an exempt activity.
• 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 under Entry 12 of Exemption Notification

• Relevant legal framework and precedents: The exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) applies to services by way of renting a residential dwelling for use as a residence. The term "residential dwelling" is not defined in the CGST Act or the notification.
• Court's interpretation and reasoning: The court interpreted "residential dwelling" in the context of normal trade parlance, which refers to a place where people reside as a home. Hostels, providing temporary accommodation, do not qualify as residential dwellings.
• Key evidence and findings: The Applicant's hostel provides temporary accommodation with additional services such as food and housekeeping, which are not typically associated with a residential dwelling.
• Application of law to facts: The court found that the Applicant's hostel accommodations do not meet the criteria of a residential dwelling used as a residence, hence not eligible for the exemption.
• Treatment of competing arguments: The Applicant's reliance on the Karnataka High Court decision in Taghar Vasudeva Ambrish was noted, but the court highlighted that the decision is pending appeal in the Supreme Court.
• Conclusions: The hostel accommodations provided by the Applicant are not exempt under Entry 12 of the Notification.

Issue 2: Requirement for GST Registration

• Relevant legal framework and precedents: Section 22 of the CGST Act requires registration if the aggregate turnover exceeds twenty lakh rupees.
• Court's interpretation and reasoning: The court determined that the Applicant's services constitute a taxable supply, mandating registration if turnover thresholds are met.
• Conclusions: The Applicant must register under GST if their turnover exceeds the specified threshold.

Issue 3: Tariff Heading and Rate of Taxability

• Relevant legal framework and precedents: Notification No. 11/2017, Central Tax (Rate) outlines the 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%.

Issue 4: Composite Supply of In-house Food

• Relevant legal framework and precedents: Section 2(30) of the GST Act defines composite supply.
• Court's interpretation and reasoning: The provision of food is 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: No ruling was issued as the question does not fall within the scope of Section 97(2).

3. SIGNIFICANT HOLDINGS

• Core principles established: The judgment clarifies that hostel accommodations do not qualify as residential dwellings for GST exemption purposes.
• Final determinations on each issue:
• Hostel accommodations are not exempt under Entry 12 of the Notification.
• The Applicant must register under GST if turnover exceeds twenty lakh rupees.
• The applicable tax rate for hostel services is 18%.
• In-house food supply is part of a composite supply, taxable at 18%.
• No ruling on the fifth question as it falls outside Section 97(2).

Verbatim Quotes:

• "Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification."
• "The place rented out is neither a residential dwelling nor being rented out for use as residence."

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