2024 (5) TMI 399 - AAR - GST

Hostel accommodation services for students and working women not exempt from GST under Entry 12 of Notification 12/2017

AAR Tamil Nadu ruled that hostel accommodation services provided to students and working women do not qualify for GST exemption under Entry 12 of ... Exemption from GST - residential dwelling for use as residence services or not - hostel accommodation being provided by the applicant to students and working women - eligibility for GST exemption in terms of Entry No. 12 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 - HELD THAT:- It is clear that the purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of ‘renting of residential dwelling’ for ‘use as residence,’ being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence - Hence, it is clear that hostel accommodation is not equivalent to residential accommodation and hence the services supplied by the applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate), dated 28-6-2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 9/2017-I.T. (Rate), dated 28-6-2017, as amended. Requirement for registration - HELD THAT:- The applicant’s service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate), dated 28-6-2017 as amended, the applicant is very much be required to take registration under the GST Enactments, as the arrangement between the applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2(b) of the Second Schedule to the CGST Act, the said transaction constitutes “supply” - the applicant is required to get themselves registered in the State of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees. Classification of service - providing hostel accommodation - rate of tax - HELD THAT:- The hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, supply of hostel accommodation services (Tariff Heading 9963) is taxable @ 9% CGST + 9% SGST under Sl. No. 7(vi) of the above Notification [Sl. No. 7(ix) as per original notification]. Taxability - composite supply or not - activity of supply of in-house food to the inmates of the hostel amounts to providing services in a composite manner and the hostel accommodation services provided by the applicant, being the principal supply - HELD THAT:- In the event of the hostel accommodation being an exempt activity, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt being in the nature of a composite exempt supply - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. Since the applicant provides a number of services in a composite manner, the hostel accommodation services provided by the applicant, being the principal supply, which is taxable @ 18%, will be tax rate for the composite supply provided by them. Issues Involved:1. Eligibility for GST exemption for hostel accommodation.2. Requirement for GST registration.3. Tariff heading and tax rate for hostel accommodation services.4. Taxability of in-house food supply as part of composite supply.5. Scope of ruling under Section 97(2) of the GST Act.Summary:Issue 1: Eligibility for GST Exemption for Hostel AccommodationThe applicant sought clarification on whether the hostel accommodation provided to students and working women qualifies for GST exemption under Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate), dated 28-6-2017. The Authority ruled that the hostel accommodation does not qualify as a 'residential dwelling for use as residence' as described in the notification. The premises rented out by the applicant are considered commercial establishments rather than residential dwellings. Therefore, the services supplied by the applicant are not eligible for GST exemption.Issue 2: Requirement for GST RegistrationGiven that the hostel accommodation services provided by the applicant are not exempt from GST, the applicant is required to register for GST if their aggregate turnover in a financial year exceeds twenty lakh rupees. This is in accordance with Section 22 of the CGST Act, 2017.Issue 3: Tariff Heading and Tax Rate for Hostel Accommodation ServicesThe supply of services by way of providing hostel accommodation falls under Tariff Heading 9963. The applicable tax rate is 9% CGST + 9% SGST under Sl. No. 7(vi) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, as amended by Notification No. 20/2019-Central Tax (Rate), dated 30-9-2019.Issue 4: Taxability of In-House Food Supply as Part of Composite SupplyThe activity of supplying in-house food to the inmates of the hostel is considered a composite supply. The principal supply is the hostel accommodation service, which is taxable at 18%. Therefore, the entire composite supply, including in-house food, is taxable at the rate applicable to the principal supply.Issue 5: Scope of Ruling under Section 97(2) of the GST ActNo ruling was issued for the fifth question as it does not fall under the scope of Section 97(2) of the GST Act.Ruling:1. Hostel accommodation services are not eligible for GST exemption under Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate), dated 28-6-2017.2. The applicant must register for GST if their aggregate turnover exceeds twenty lakh rupees.3. Hostel accommodation services fall under Tariff Heading 9963 and are taxable at 9% CGST + 9% SGST.4. The supply of in-house food is part of a composite supply, with the principal supply being hostel accommodation, taxable at 18%.5. No ruling issued for the fifth question as it does not fall under the scope of Section 97(2) of the GST Act.