TaxTMI 
TaxTMI 
2020 (1) TMI 1509
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.... * The issue raised by M/s Kalani Infrastructure Pvt. Ltd., A-14-A, Road No.1, Indraprastha Industrial Area, Kota, Rajasthan (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (a), (b) & (e) given as under: - (a) Classification of Services; (b) Applicability of a notification issued under the provisions of this act; (e) Determination of liability to pay tax on any services; * Further, the applicant being a registered person (GSTIN is 08AACCK1540L1ZK as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: * That Fortuna Icon, a unit of the applicant is running a hostel for residential accommodation for students. They are registered in GST having GSTIN 08AACCK1540L1ZK. The applicant wishes to charge a consolidated amount of Rs. 17,000/- per month from the students against provision of hostel accommodation for residence purposes which would al....
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.... more components wherein the principal activity is of the rental services of hostel accommodation, the question before Advance ruling authority is whether the supply of hostel accommodation alongwith food facility would be treated as 'composite supply' as defined under CGST Act, 2017. * To determine this, it is pertinent to refer to the concept of 'composite supply' provided in GST law. Section 2(30) of CGST Act, 2017 defines 'composite supply' as under: "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; A perusal of the above definition implies that a supply of goods and/or services will be treated as composite supply if it fulfills the following three criteria: (a) S....
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....rvices to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business If current nature of transaction in question is tested based on above factors, it would be amply clear that the provision of hostel accommoda....
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....ngly, as per interpretation of the applicant, the provision of hostel accommodation along with food should be treated as 'composite supply' and applicability of GST would be determined as per Section 8 of the CGST Act, 2017 which provides that tax liability on a composite supply would be that of what is applicable on principal supply. Hence, the same tax treatment would apply to entire package as applicable to hostel accommodation services. • It is further relevant to submit that the Hon'ble Chhattisgarh Authority for Advance Ruling under GST, Raipur in the matter of Kamal Kishor Agarwal, has issued an advance ruling No. STC/AAR/11/2018-Raipur dated 02.03.2019 reported at 2019 (24) G.S.T.L. 496 (A.A.R. - GST) on the similar issue of the ancillary services of food and parking provided to the students by the Charitable Trust along with hostel accommodation. The ARA held as under: "Hostel run by charitable trust - Providing residence to students on rent - Nominal lump sum amount of' 7000 and ' 6000 per month per bed depending upon number of beds per room, charged for giving residence - Ancillary services such as food, parking also provided wit....
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....nt charged for residential accommodation in hostel from the student along with food facility is Rs. 17,000/- for full month the per day charges does not exceed Rs. 1000/-, the entire activity of hostel accommodation along with food facility would be exempt from GST under aforesaid Notification. * It has been further clarified by CBIC vide Circular No. 32/06/2018-GST, dated 12th February, 2018 that accommodation services in hostels having declared tariff below Rs. 1000/- is exempt from GST. * In view of the above facts and applicant's interpretation and understanding of the same, it is submitted that the provision of hostel accommodation along with food facility is a composite supply which is exempt from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended read with CBIC Circular No. 32/06/2018-GST, dated 12th February, 2018. * The applicant also provided some additional submission vide dated 12.12.2019, received in this office on 17.12.2019 regarding list of other amenities provided along with hostel accommodation and some case laws. 2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT a) Whether provision of hostel accommoda....
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....es should be taxable supplies and secondly principal and ancillary supplies should be naturally bundled and supplied in conjunction to each other in the ordinary course of business. The applicant by own admission declares principal supply that is accommodation in the Hostel as non- taxable supply in terms of referred notification. Hence, condition precedent of composite supply of being taxable supplies is not fulfilled. 3) The litany of the ancillary supply of services as prayed by applicant to be treated as ancillary supplies of composite supply not liable to be taxed is quiet exhaustive covering all the conceivable services like coaching, catering, library, entertainment, parking etc. By, no stretch of imagination, supply of these services can be treated as naturally bundled and supplied in conjunction to each other in the ordinary course of business. Basically composite supply means those supplies involving principal and ancillary supplies which cannot be supplied separately in ordinary course of business and supplies of one occurs in conjunction to other. 4) Thus doctrine of inseparability is key to composite supply. However, in impugned case all the services ....
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....o be made for a consideration by a person in the course or furtherance of business; As the applicant is supplying accommodation services along with some ancillary services for a consideration of Rs. 17000/- per month in course of business, the activity falls under the definition of supply. * Further, as the supply involves multiple services, the issue has to be examined whether the aforesaid supply is a Composite Supply or a Mixed Supply. Concept of 'composite supply' under Section 2 (30) of GST Act, 2017 defines 'composite supply' as under: "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; In view of above, we find that essential components of a composite supply are as under- -two or more taxable supplies; -services should be naturally bundled; -supplied in ordinary course of business; - one of the supply out of whole should be a principal supply....
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.... in a particular area of business pro-vide similar bundle of services, iii. The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. We find that naturally bundled services are those services wherein one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. If current nature of supply of services is tested based on above factors, it can be ascertained that the provision of hostel accommodation could be a principal supply but ancillary services like food, gym, housekeeping, play room, cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundled naturally with principal supply. ❖ As the jurisdictional officer has commented, the ancillary services as mentioned above are not provided with accommodation in Kota and is not a common practice. Further, the perception of a service recipient cannot be declared sacrosanct in respect of above said ancillary services. Further, the ser....
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....ods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; Further, tax liability on a mixed supply shall be determined as defined in Section 8 (b) of GST Act, 2017 which is as below- "a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." We observe that the services supplied by the applicant such as hostel accommodation, food, gym, playroom etc. are provided for a single price of Rs. 17000/- per student and is not a Composite supply, therefore, the supply is a Mixed Supply under GST. The rate of GST on total supply will be that rate which is highest among the services provided by the applicant. * To ascertain rate of GST on Mixed Supply, we have to examine rate of GST on services provided by the applicant to determine the highest rate of tax applicable on whole supply - • The service of hostel accommodation, consideration for which is less than ....
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....ation No. 12/2017-CT(Rate) refers] ❖ The service of Gym or fitness centre is classifiable under HSN 999723 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18%(SGST 9% + CGST 9%) as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The relevant portion of the said annexure and notification is as below- ANNEXURE 11/2017-CT (R) Dated 28.06.2017 Sl.No. Service Section, Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 708 Group 99972 Beauty and physical well-being services 709 999721 Hairdressing and barbers services 710 999722 Cosmetic treatment (including cosmetic or plastic surgery), manicuring and pedicuring services 711 999723 Physical well-being services including health club and fitness centre 712 999729 Other beauty treatment services nowhere else classified Notification No. 11/2017-CT (R) Dated 28.06.2017 Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Conditio....
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....umption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent. Explanation. - "declared tariff' includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]] ❖ The applicant is providing "playroom" services to students residing in hostel. The said service is a kind of sporting/re....
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....GST 9% + CGST 9%) as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The relevant portion of the said annexure and notification is as below- ANNEXURE 11/2017-CT (R) Dated 28.06.2017 Sl.No. Chapter, Section, Heading, or Group Service Service Code (Tariff) Description (1) (2) (3) (4) 400 Heading 9985 Support services 420 Group 99853 Cleaning services 421 998531 Disinfecting and exterminating services 422 998532 Window cleaning services 423 998533 General cleaning services 424 998534 Specialised cleaning services for reservoirs and tanks 425 998535 Sterilisation of objects or premises (operating rooms) 426 998536 Furnace and chimney cleaning services 427 998537 Exterior cleaning of buildings of all types 428 998538 Cleaning of transportation equipment 429 998539 Other cleaning services nowhere else classified Notification No. 11/2017-CT (R) Dated 28.06.2017 Sl.No. Chapter, Section, Heading, Group or Service Code (Tar....