Hostel accommodation services don't qualify for GST exemption under residential dwelling provisions, taxable at 18%

The AAR Tamil Nadu ruled that hostel accommodation services do not qualify for GST exemption under residential dwelling provisions. The authority held that hostels are not equivalent to residential dwellings and are not rented for use as residence, requiring strict interpretation of exemption notifications. The applicant must register for GST if turnover exceeds Rs. 20 lakh. Hostel accommodation services are taxable at 18% GST (9% CGST + 9% SGST) under tariff heading 9963. When food and other services are bundled with accommodation at a single consolidated price, it constitutes a composite supply taxable at the principal supply rate of 18%.

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Issues Involved:

1. Eligibility for GST exemption for hostel accommodation under Entry 12 of Exemption Notification No. 12/2017-CT (Rate).
2. Requirement for GST registration based on turnover.
3. Applicable GST rate and tariff heading 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.

Detailed Analysis:

1. Eligibility for GST Exemption:

The primary issue was whether the hostel accommodation provided by the Applicant qualifies as a "residential dwelling for use as residence" under Entry 12 of Exemption Notification No. 12/2017-CT (Rate). The judgment clarified that the term "residential dwelling" is not defined under the CGST Act, but under the erstwhile service tax law, it is interpreted as any residential accommodation excluding places meant for temporary stay like hotels and hostels. The Applicant's hostel, which provides accommodation to students and working women, does not qualify as a residential dwelling because it offers temporary lodging with additional services like food and housekeeping, which are not typical of residential dwellings. The judgment emphasized that the premises are commercial, not residential, and the exemption is specific to residential properties used as residences by families or individuals.

2. Requirement for GST Registration:

The judgment stated that since the Applicant's service of providing hostel accommodation is not exempt under the GST notification, it constitutes a taxable supply. Therefore, the Applicant is required to register under the GST Act if their aggregate turnover exceeds twenty lakh rupees in a financial year, as per Section 22 of the GST Acts.

3. Applicable GST Rate and Tariff Heading:

The judgment determined that 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), as amended. The judgment differentiated hostel services from hotel accommodations, noting that hostels provide longer-term stays with basic facilities, and thus, the GST rate applicable to hotels cannot be applied to hostels.

4. Taxability of In-House Food Supply:

The judgment addressed whether the supply of in-house food to hostel inmates is exempt as part of a composite supply. It concluded that since the primary service is taxable hostel accommodation, the entire composite supply, including food services, is taxable at the rate applicable to the principal supply, which is 18%.

5. Scope of Ruling under Section 97(2):

The judgment did not issue a ruling on the fifth question raised by the Applicant, as it did not fall within the scope of Section 97(2) of the GST Act. This section outlines the specific issues on which advance rulings can be sought, and the question did not align with these criteria.

Ruling:

- The hostel accommodation services provided by the Applicant are not eligible for GST exemption under the specified notification entries.
- The Applicant must register for GST if their turnover exceeds the threshold.
- Hostel accommodation services are taxable at 18% GST.
- The supply of in-house food is part of a composite supply and taxed at the rate applicable to hostel accommodation.
- No ruling was issued for the fifth question as it was outside the scope of the advance ruling provisions.

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