Hostel accommodation services for students and working women do not qualify for GST exemption under Entry 12 of Notification 12/2017

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 Entry 12 of Notification 12/2017. The accommodation constitutes taxable supply of services requiring GST registration if turnover exceeds twenty lakh rupees annually. Hostel services are classified under tariff heading 9963, taxable at 18% GST (9% CGST + 9% SGST). When bundled with in-house food and other services, it constitutes composite supply with hostel accommodation as principal supply, attracting 18% tax rate on the entire composite supply.

---

---

ISSUES:

• Whether the hostel accommodation services provided qualify as "services by way of renting of residential dwelling for use as residence" eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) and corresponding state notifications.
• Whether the applicant is required to obtain GST registration based on the nature of services and turnover.
• Classification of the supply of hostel accommodation services under GST tariff headings and applicable rate of tax.
• Whether the incidental supply of in-house food to hostel inmates qualifies as exempt being part of a composite supply with accommodation.
• Admissibility of the fifth question raised by the applicant under Section 97(2) of the GST Act.

RULINGS / HOLDINGS:

• Hostel accommodation services do not qualify as "services by way of renting of residential dwelling for use as residence" and hence are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017 CT(Rate) dated 28.06.2017 and corresponding notifications.
• The applicant is required to get registered under GST if the aggregate turnover exceeds twenty lakh rupees in a financial year, as the supply constitutes taxable supply under Section 7(1)(a) of the CGST Act, 2017.
• The supply of hostel accommodation services falls under Tariff heading 9963 and is taxable at 9% CGST + 9% SGST under Sl.No. 7(vi) of Notification No. 11/2017 Central Tax (Rate), as amended.
• The supply of in-house food to hostel inmates is a composite supply with hostel accommodation as the principal supply, and the entire composite supply is taxable at the rate applicable to the principal supply, i.e., 18%.
• No ruling is issued on the fifth question as it does not fall within the scope of Section 97(2) of the GST Act.

RATIONALE:

• The legal framework includes Section 7 (definition of supply), Section 22 (registration), Section 2(30) (composite supply), and relevant exemption notifications under CGST and TNGST Acts.
• The term "residential dwelling" is not defined under GST law but is interpreted based on erstwhile Service Tax guidance and common parlance to exclude hotels, hostels, guest houses, or similar commercial accommodations meant for temporary stay.
• The exemption under Entry 12 is conditional and requires both (i) renting of a residential dwelling and (ii) use of such dwelling as residence; hostels do not satisfy these conditions as they provide commercial accommodation with ancillary services and lack landlord-tenant relationships typical of residential tenancy.
• Licensing and regulatory requirements applicable to hostels classify them as public or commercial buildings rather than residential dwellings, supporting their non-exempt status.
• Precedents and case law cited by the applicant were found inapplicable due to differing facts and contexts, and the exemption notification must be interpreted strictly as per Supreme Court authority, with ambiguity resolved in favor of revenue.
• The classification and rate determination rely on the GST tariff notifications, distinguishing hostels from hotels and applying the appropriate rate of 18% (9% CGST + 9% SGST) for hostel accommodation composite supplies.

---