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 Notification 12/2017-Central Tax (Rate). The authority held that hostels are neither residential dwellings nor rented for residential use, requiring strict interpretation of exemption provisions. The applicant must register under GST if turnover exceeds twenty lakh rupees. Hostel accommodation is taxable at 18% CGST + SGST under composite supply provisions, with hostel services being the principal supply despite including incidental food services.

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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 Accommodation
The 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 Registration
Given 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 Services
The 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 Supply
The 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 Act
No 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.

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