Service tax on hostel provided to students (Not an Educational Institution)

[Guest]

Dear Sir,

I have got an opportunity to run a hostel for students, for which i have to take few houses on rent and accomodate the students (4 to 6 in a house) after furnishing. Rent paid for the house will be around ₹ 27000 per month.

Rent collected will be around ₹ 12,000 per student.

Need to know whether can i avail exemption under notification No.25/2012 dt. 20.06.2016 as the rent collected per student is around ₹ 400 per day which is less than ₹ 1000 as mentioned in the notification.

Also food fees can be charged at ₹ 3000 per student in addition to the above. Food is to be prepared and provided in the institution in which they study.

Need to know whether food component attracts service tax.

Thanks in advance.

[KASTURI SETHI]

Sh.Alagappan Ji,

Does the rent of ₹ 400/- worked out by you is per room per day ? Catering is taxable.

[Guest]

Yes. Rent collected per month is ₹ 12,000.

Therefore for 30 days, it works out to ₹ 400 per day.

[KASTURI SETHI]

Dear Sir,

In my view exemption in respect of service, namely, Renting Of Immovable Property Service is admissible. Now the most crucial point is 'Consideration' of both services must not clash.Books of accounts i.e. Invoice book, bank statement etc. must be fool-proof.

[Ganeshan Kalyani]

Sir, nicely replied by Sri Kasturi Sir. Thanks.

AI Summary

Renting of Immovable Property Service exemption may apply if accommodation charges per occupant are below the daily threshold; catering remains taxable. Hostel accommodation via rented furnished houses may qualify for the Renting Of Immovable Property Service exemption if the per-occupant daily consideration is below the notification threshold and the accommodation charge is kept distinct from other charges. Catering supplied to students is a separate taxable catering service. Clear segregation in invoices and accounting is required to preserve the accommodation exemption and prevent recharacterisation.