Hostel accommodation services for students and working women don't 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 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). When bundled with in-house food services, it constitutes composite supply taxed at the principal supply rate of 18%.

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1. ISSUES PRESENTED and CONSIDERED

The legal questions considered in this 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 the identical Notification under the TNGST Act, 2017, and Entry 13 of Exemption Notification No.09/2017-IT (Rate) dated 28.06.2017, as amended.
• Whether the Applicant is required to register under GST 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 servicesRs.
• Whether the supply of in-house food to hostel inmates is exempt as a composite supply if hostel accommodation is deemed exempt.
• Whether any ruling can be issued on a question not falling under the scope of Section 97(2) of the GST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Exemption Eligibility for Hostel Accommodation

• Relevant Legal Framework and Precedents: The exemption under Entry 12 of Notification No. 12/2017-CT (Rate) pertains to services by way of renting of residential dwelling for use as residence. The term "residential dwelling" is not defined under the CGST Act, but is interpreted in normal trade parlance.
• Court's Interpretation and Reasoning: The court analyzed whether the hostel accommodation qualifies as a "residential dwelling" for use as residence. It concluded that hostels, which provide accommodation with ancillary services, do not fit the definition of "residential dwelling" as they are more akin to commercial establishments.
• Key Evidence and Findings: The Applicant provides hostel services with additional amenities such as food and housekeeping, which are not typical of a residential dwelling. Licenses and certificates obtained by the Applicant classify the hostel as a public building, not a residential dwelling.
• Application of Law to Facts: The court found that the Applicant's hostel accommodation does not qualify for exemption as it does not meet the criteria of "residential dwelling for use as residence."
• Treatment of Competing Arguments: The Applicant's reliance on the Karnataka High Court decision was noted, but the court highlighted that a Special Leave Petition is pending before the Supreme Court. The court also dismissed the Applicant's reliance on zoning regulations and other case laws as not applicable.
• Conclusions: The services provided by the Applicant are not eligible for exemption under the specified notifications.

Issue 2: Requirement for GST Registration

• Relevant Legal Framework: Section 22 of the CGST Act mandates registration for suppliers whose aggregate turnover exceeds twenty lakh rupees in a financial year.
• Court's Interpretation and Reasoning: The court determined that the Applicant's services constitute a "supply" under Section 7(1)(a) of the CGST Act, requiring registration if the turnover threshold is exceeded.
• Conclusions: The Applicant must register under GST if their turnover exceeds the specified threshold.

Issue 3: Applicable Tariff Heading and Rate of Tax

• Relevant Legal Framework: Notification No. 11/2017, Central Tax (Rate), specifies tax rates for various services, including accommodation services under Heading 9963.
• Court's Interpretation and Reasoning: Hostel services are classified under Heading 9963 and are taxable at 18% (9% CGST + 9% SGST) as per the notification.
• Conclusions: The supply of hostel accommodation services is taxable at 18% under the specified tariff heading.

Issue 4: Taxability of In-House Food Supply

• 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.
• Court's Interpretation and Reasoning: The court found that the supply of in-house food is part of a composite supply with hostel accommodation as the principal supply, taxable at the same rate.
• Conclusions: The composite supply, including food services, is taxable at 18%.

Issue 5: Scope of Ruling

• Court's Interpretation and Reasoning: The court declined to issue a ruling on the fifth question as it does not fall under Section 97(2) of the GST Act.
• Conclusions: No ruling was issued for the fifth question.

3. SIGNIFICANT HOLDINGS

• Core Principles Established: Hostel accommodation does not qualify as a "residential dwelling" for GST exemption purposes. The supply of hostel services is a taxable supply requiring registration if turnover exceeds the threshold.
• Final Determinations on Each Issue:
• Hostel services are not exempt under the specified notifications.
• The Applicant must register under GST if the turnover exceeds twenty lakh rupees.
• Hostel services are taxable at 18% under Heading 9963.
• Supply of in-house food is part of a composite supply taxable at 18%.
• No ruling on the fifth question as it falls outside the scope of the Act.

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