Hostel Service - without Education - Liable to Service Tax?

[RAJJ gadhiya]

Dear Sir,

With regard to New Service Taxation System-Negative List Based taxation w.e.f 1.7.2012 under Finance Act 2012, my query is with regard to Exemption from Renting of Immovabel Property.

Facts for this discussion are as under:

Charges collected for residential and lodging of the students (esp college students ) staying in hostel owned by private commercial entity will be liable to service tax under Negative list based taxation?

Further students are just residing and availing mess facility in the hostel premises BUT EDUCATION IS OBTAINED FROM COLLEGES not connected in any way with the hostel activity?

In other words, colleges are just providing education and independent hostel services are provided by private commercial entity. It is to be noted that Hostel was categorically exempted from Service tax levy by excluding in the definition of txable service in earlier LAW.

But after introdcution of Negative list whether it will still be exempted from service tax levy ? If yes, under which specific terminlogy of Point No 18 of Mega Exemption notification  no. 25/2012?

Whether it will fall under commercial places meant for residential dwelling or lodging purpose? Your early comments on the aforesaid discussion wil b highly appreciated.You may reply detailed discussion on [email protected]

Thank you in anticipation.

[JAMES PG]

Are you collecting mess fees separately or alongwith rent ?

[RAJJ gadhiya]

Dear Sir,

 

Thanks for your immediate response.

 Mess fees and Reant are collected together in lupsum and neither bifurcation is made by entity nor students are aware of the same.

Your advise is awaited.

Thanking you

[JAMES PG]

As per the mega exemption Notification No 25/2012, Service Tax will be applicable for lodging and accommodation services, wherein room rent is above Rs 1000 per day. So long as you are collecting rent below this limit, ST will not be applicable

[RAJJ gadhiya]

Dear Sir,

Thanks a lot for valuable information.

What would be your comment if mess facility and Rent is collected seperately?

Does that mean provision of two seperate services?

Whether SSI eemption to that entity will restrict to total 10 lakhs for all services?

Thanks again

 

[JAMES PG]

If Mess charge is collected separately, you will be covered under the ambit of Catering service and liable to pay ST @ 60% of the value if the turnover exceeds Rs 10 lacs

[Vijay kumar]

In the facts provided, yours is a case of bundled service, hostel accommodation with mess. In terms of Section 66F(3)(a) of the Finance Act, 1994 it seems to be  a naturally bundled service. The said provision reads as - if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character. since the essential character of the service is accommodation for residential purpose, the exemption under sl.no.18 of mega exemption nonf. 25/2012-ST appears to be attracted, provided the rent charged per day is below Rs.1000/-, including the mess fee. 

[RAJJ gadhiya]

Dear Sir,

 Thank you very much for your reply !!

Sir Can it be said as renting of residential dwelling for use as residence by students?

Thanks

 

AI Summary

Are Hostel Services Under Rs. 1000 Subject to Service Tax? Exploring Exemptions and Bundled Services Rules A discussion on a forum concerns the applicability of service tax on hostel services under the Negative List-based taxation introduced by the Finance Act 2012. The query involves whether charges for student lodging in a private hostel, unconnected to educational institutions, are subject to service tax. Responses clarify that if rent, including mess fees, is below Rs. 1000 per day, it is exempt under the Mega Exemption Notification No. 25/2012. If mess fees are collected separately, they may be classified under catering services, subject to service tax if turnover exceeds Rs. 10 lakhs. The bundled nature of services may affect tax applicability.