2025 (10) TMI 713 - AAR - GST

GST: Hostel accommodation not charitable exemption; exempt if =20k per person month with stay =90 days; leasing, catering taxable 9%+9%

AAR held that provision of hostel accommodation by a trust does not qualify as a 'charitable activity' for GST exemption, except for specifically defined ... Levy of GST on hostels for poor and middle class students run by charitable Trusts - levy of GST on hostels for High class students run by charitable Trusts - Yardstick to classify the students as Poor, Middle and High class - HELD THAT:- The activity of providing hostel facilities by a Trust to students is not covered under the definition of ‘charitable activities’. Hence, exemption under GST is not available to other activities, except the activities as defined above, carried out by a ‘Charitable Trust’. The accommodation services having value of supply less than or equal to twenty thousand rupees per person per month is exempted from payment of GST provided that the accommodation service is supplied for a minimum continuous period of ninety days. So, the applicant has to ensure that both the situations, namely value of supply and period of stay, are satisfied before claiming exemption under this SI. No. 12A of the said Notification - it is concluded that the activity undertaken by the applicant is clearly that of supply of service by way of leasing of premises to an educational institution. Educational Services are covered under Heading 9992 in the scheme of classification of services and are taxable. The Notification lists out services which are exempted when provided to an educational institution. This list does not contain the activity of leasing of premises to an educational institution. In view of the discussion, it becomes clear that the leasing out of a part of premises to another educational institution imparting higher education is not covered under the exempted category, whereby the said supply of service attracts CGST @ 9% and SGST @ 9% under the Heading 9972 of the Scheme of classification of services under GST. Besides providing leasing of premises to educational institution, the applicant also supplies food to the students of the other educational institution under an agreement with the said institution. The Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, exempts catering services provided to an educational institution with a restriction that the said exemption is available only when the recipient educational institution is engaged in providing pre-school education and education up to higher secondary school or equivalent. In the present case, the recipient college, being an educational institution imparting higher education, the services supplied to them by the applicant are not exempted and are liable to CGST @ 9% and SGST @ 9% under Heading 9963 of the scheme of classification of services under GST. ISSUES PRESENTED AND CONSIDERED 1. Whether leasing part of an educational institution's premises to another educational institution (for accommodating its students) constitutes a 'supply' and is subject to GST. 2. Whether hostels run by charitable trusts for students (irrespective of socio-economic classification) are exempt from GST under the charitable activities exemption or under the accommodation exemption introduced w.e.f. 15.07.2024 (SI No. 12A of Notification No.12/2017-CTR). 3. Whether catering/food supply provided by one educational institution to students of another educational institution (where invoice is raised to the recipient institution) is exempt from GST under the educational institution exemption. 4. Whether the questions asking for yardstick/classification of students into poor/middle/high class and the applicable GST rates (if taxable) are admissible under the Advance Ruling provisions. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether leasing premises to another educational institution for student accommodation is a 'supply' taxable under GST Legal framework: Scope of 'supply' (Section 7, CGST Act) includes lease/rental/lease for consideration; definition of 'business' (Section 2(17)) includes activities regardless of pecuniary motive; 'consideration' (Section 2(31)) includes payment by any person in respect of supply. Precedent Treatment: Applicant relied on decisions where services were supplied directly to students; the Authority examined those decisions and found their factual matrix different. Interpretation and reasoning: Leasing part of premises to another educational institution for consideration falls squarely within statutory definitions of 'supply' and 'business.' The transaction is between institutions (bills raised to recipient institution), not directly to individual students. Exemptions listed under Notification No.12/2017-CTR do not include leasing of premises to educational institutions. Ratio vs. Obiter: Ratio - leasing premises to another educational institution for accommodating its students is a taxable supply; reasoning on definitions and statutory scope is dispositive. Observations distinguishing case law concerning direct supply to students are explanatory. Conclusion: Leasing of premises by an educational institution to another educational institution for student accommodation is a taxable supply and attracts CGST and SGST (each at applicable rates under the relevant headings). Issue 2: Applicability of charitable activities exemption and SI No.12A (15.07.2024) to hostels run by charitable trusts for students of varying socio-economic class Legal framework: Notification No.12/2017-CTR exempts 'services by an entity registered under section 12AA ... by way of charitable activities'; 'charitable activities' definition enumerates specific categories (public health, advancement of religion/yoga, advancement of educational programmes for certain vulnerable groups, preservation of environment, etc.). SI No.12A (inserted by Notification No.04/2024-CTR effective 15.07.2024) exempts accommodation services where value = ?20,000 per person per month and minimum continuous period of stay is ninety days. Precedent Treatment: Applicant relied on rulings where exemption applied to accommodation/food supplied directly to students; Authority found factual divergence (those rulings concerned direct services to students and/or different facts) and therefore distinguished them. Interpretation and reasoning: The statutory definition of 'charitable activities' does not include general provision of hostel facilities to students; hence hostels per se do not attract the charitable exemption. However, SI No.12A creates a separate conditional exemption for accommodation meeting value and duration thresholds regardless of charitable status. The Notification does not classify recipients by socio-economic status; exemption under SI No.12A is condition-based, not recipient-class based. Ratio vs. Obiter: Ratio - general hostel services by charitable trusts are not covered under the enumerated 'charitable activities' and are not automatically exempt; SI No.12A provides a distinct conditional exemption when both price and continuous period conditions are satisfied. Observations on socio-economic classification of students are explanatory/obiter (Notification does not provide such categorisation). Conclusion: Hostels run by charitable trusts are not per se exempt under the charitable activities exemption; they may claim exemption only if conditions of SI No.12A (value = ?20,000 per person per month and continuous stay = 90 days) are fulfilled. There is no statutory yardstick classifying students as poor/middle/high for exemption purposes. Issue 3: GST treatment of food/catering supplied by one educational institution to students of another educational institution (invoice to recipient institution) Legal framework: Notification No.12/2017-CTR exempts certain services provided to educational institutions under Heading 9992, including catering provided to an educational institution, but with proviso limiting application to institutions providing pre-school to higher secondary education (and related exceptions). Precedent Treatment: Applicant cited authorities addressing direct catering to students; Authority found those authorities factually different and not controlling since the recipient here is a higher-education institution. Interpretation and reasoning: The exemption for catering to educational institutions is conditional and limited to recipient institutions engaged in pre-school to higher secondary education. Where the recipient institution imparts higher education, catering services provided to it are not covered by that exemption. The fact that invoices are raised to the recipient institution does not alter the legal character of the supply or the limited scope of the exemption. Ratio vs. Obiter: Ratio - catering/food supplied to a higher-education institution is not exempt under the specified Notification and is taxable; distinction from direct supplies to students in prior decisions is explanatory. Conclusion: Food/catering supplied to students of another institution where the recipient institution imparts higher education is a taxable supply and attracts GST (CGST + SGST) under the applicable classification. Issue 4: Admissibility of queries seeking socio-economic classification of students and the applicable rate(s) if taxable Legal framework: Advance Ruling admissibility governed by Section 97(2) of the CGST Act; scope limited to questions of law or facts arising from a transaction or activity proposed or undertaken. Precedent Treatment: N/A within text beyond procedural application of Section 97(2). Interpretation and reasoning: Questions asking for a yardstick to classify students as poor/middle/high and asking for applicable GST rates were held hypothetical and not within Section 97(2). The Authority explained these queries are redundant and not admissible for advance ruling; the applicant conceded and requested they be ignored. Ratio vs. Obiter: Ratio - hypothetical, classificatory queries and general rate inquiries not tied to concrete proposed/undertaken transactions fall outside admissible scope and are not to be answered; procedural ruling on admissibility is dispositive. Conclusion: Queries on classification of students by socio-economic status and the hypothetical request for applicable rates were not admitted and therefore not answered. Cross-References and Practical Implications 1. The taxable character of leasing and catering supplies to a recipient institution engaged in higher education follows from statutory definitions of 'supply,' 'business,' and the narrow scope of exemptions in Notification No.12/2017-CTR; SI No.12A provides the sole accommodation exemption by reference to value and duration conditions. 2. Prior decisions addressing direct supplies to students are distinguishable where the contractual counterparty and factual matrix differ; such distinctions are essential when assessing exemption eligibility.