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

The AAR Tamil Nadu ruled that hostel accommodation services provided to students and working women do not qualify for GST exemption as residential dwelling. Converting residential homes into commercial hostel premises with bed-wise rentals and bundled services constitutes taxable business activity. The applicant must obtain GST registration if turnover exceeds Rs. 20 lakh. Hostel accommodation services are taxable at 18% CGST + SGST under tariff heading 9963. When food and accommodation are provided together at consolidated charges, it constitutes composite supply taxable at the principal supply rate of 18%.

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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 incidental supply of in-house food.
5. Scope of ruling under Section 97(2) of the GST Act.

Summary:

Issue 1: Eligibility for GST Exemption
The applicant sought to determine if the hostel accommodation provided qualifies for exemption u/s Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate), dated 28-6-2017. The Authority ruled that the term "residential dwelling" does not include hostels, which are considered commercial establishments. The hostel accommodation provided by the applicant does not qualify as a "residential dwelling for use as residence" and thus is not eligible for the exemption.

Issue 2: Requirement for GST Registration
Since the service of providing hostel accommodation is not exempt, the applicant is required to register u/s 22 of the CGST Act, 2017 if the aggregate turnover exceeds twenty lakh rupees in a financial year.

Issue 3: Tariff Heading and Tax Rate
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), dated 28-6-2017, as amended.

Issue 4: Taxability of Incidental Supply of In-House Food
The supply of in-house food to hostel inmates is considered a composite supply, with the principal supply being the hostel accommodation services. Therefore, the entire composite supply is taxable at 18%.

Issue 5: Scope of Ruling
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. The services by way of providing hostel accommodation are not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-C.T. (Rate).
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 is issued for the fifth question as it falls outside the scope of Section 97(2) of the GST Act.

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