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

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 applicant must register under GST if turnover exceeds Rs. 20 lakh annually. Hostel accommodation falls under tariff heading 9963, taxable at 18% GST (9% CGST + 9% SGST). When food and other services are bundled with accommodation, it constitutes composite supply taxed at the principal supply rate of 18%. The authority distinguished hostels from residential dwellings, noting hostels involve per-bed rental with bundled services constituting commercial accommodation rather than residential property rental.

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ISSUES:

• Whether services by way of providing hostel accommodation qualify for exemption under Entry 12 of Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 and identical notifications under TNGST Act and Entry 13 of Exemption Notification No. 09/2017-IT (Rate) dated 28.06.2017.
• Whether the applicant is required to obtain GST registration given the nature of services provided and turnover thresholds.
• Classification of the supply of hostel accommodation services under the GST tariff headings and applicable rate of tax.
• Whether the incidental supply of in-house food to hostel inmates forms part of a composite supply with hostel accommodation and the applicable tax rate.
• Admissibility and scope of the fifth question raised by the applicant under Section 97(2) of the CGST/TNGST Act.

RULINGS / HOLDINGS:

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

RATIONALE:

• The legal framework applied includes the Central Goods and Services Tax Act, 2017, Tamil Nadu Goods and Services Tax Act, 2017, relevant exemption notifications (No. 12/2017-CT (Rate), No. 09/2017-IT (Rate), and No. 11/2017 Central Tax (Rate)), and applicable GST rules.
• The term "residential dwelling" is not defined under GST law but is interpreted based on the erstwhile Service Tax Education Guide and common trade parlance to exclude hotels, hostels, inns, guest houses, and similar commercial accommodations meant for temporary stay.
• Hostel accommodation involves letting out rooms on a per bed basis with ancillary services such as food, housekeeping, and security, which distinguishes it from renting a residential dwelling to a family or individual for use as residence.
• Licensing and regulatory requirements applicable to hostels under various Tamil Nadu enactments indicate that hostels are treated as commercial or public buildings, not residential dwellings.
• The exemption notifications are to be interpreted strictly, with the burden on the applicant to prove eligibility; ambiguity in exemption provisions must be resolved in favor of revenue as per Supreme Court precedent.
• The composite supply concept under Section 2(30) and Section 8 of the CGST Act applies to bundled services where one service is principal; here, hostel accommodation is principal, and incidental food supply is ancillary, attracting the principal supply's tax rate.
• The decision distinguishes the present facts from contrary Karnataka High Court rulings, noting pending Supreme Court review, and rejects reliance on unrelated judicial precedents not addressing GST law or the specific exemption context.

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