In re M/s. 2 Win Residency Ladies Hostel (AAR Tamilnadu)
The recent ruling by the Authority for Advance Ruling (AAR) Tamilnadu on the GST implications for M/s. 2 Win Residency Ladies Hostel brings to light crucial considerations regarding hostel accommodation services and the supply of in-house food.
For Question No.1: The services by way of providing hostel accommodation supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No.12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No.09/2017-IT(Rate) dated 28.06.2017, as amended.
For Question No.2: The supply of services by way of providing hostel accommodation will fall under Tariff heading 9963 and is taxable 9% CGST + 9% SGST under Sl. No. 7(vi) of the Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended vide Notification No. 20/2019 — Central Tax (Rate) dt 30.09.2019.
For Question No.3: The activity of supply of in-house food to the inmates of the hostel amounts to providing services in a composite manner and the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable e.g. 18%, will be tax rate for the composite supply provided by them.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING TAMILNADU
The applicant, M/s. 2 Win Residency Ladies Hostel, No.76/3, V.N. Purdur, Thudiyalur main road, Saravanampatti, Coimbatorc -641 035 (herein after referred to as ‘The Applicant’), is registered under the GST Act, 2017, with GSTIN 33ASXPA8143R1ZZ. The Applicant is running a ladies residential hostel for college students and working people.
2.1. The Applicant has submitted the copy of application in Form GST ARA 01 and also submitted a copy of challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017.
2.2. The Applicant submitted that they are providing best hostel facilities to college female students and also to working women as most of the students and working people travel far and wide from their remote villages. The total charges collected for lodging ranges between Rs.66/- per day to Rs.100/- per day. Thus, the monthly tariff per student or per inmate ranges between Rs. 2000/- to Rs. 3000/- per month per inmate. They provide single room occupation, or double room sharing or dormitory style of accommodation and rates vary accordingly.
2.3. The Applicant’s interpretation of law/facts in respect of the questions raised, they submitted the following that-
➣ They have licence to run the residential hostel for boarding and lodging under Section 5 of the Tamilnadu Hostels and Home for women and children (Regulation Act 2014) [hereinafter referred to as the “Hostel Regulation Act”).
➣ Section-2 (e) of the ‘Hostels Regulation Act’ defines “Hostel” or “Lodging House” to mean ‘a building in which accommodation is provided for women or children or both either with boarding or not.’ The term ‘Home for Women & Children” is defined in section-2 (d) to mean ‘an institution, by whatever name called, established or maintained or intended to be established or maintained for the reception, care, protection for welfare of women or children or both’; On the other hand, the term ‘residential hotel’ is defined in section-2 (14) of the Tamilnadu Shops &, Establishments Act, 1947 to mean ‘any premises in which business is carried on bonafide for the supply of dwelling accommodation and meals on payment of a sum of money to a traveller or any member of the public or class of the public’; Thus, the `hostel’ accommodation which falls within the purview of the ‘Hostels Regulation Act’ cannot be equated with that of a ‘hotel accommodation which falls within the realm of Tamilnadu Shops 86 Establishments Act, 1947 by any stretch of imagination.
➣ Under the erstwhile Service Tax regime, the ‘services by way of renting of residential dwelling for use as residence’ was included in the negative list under clause (m) of Section-66D of the Finance Act 1994. Similarly, no VAT was leviable for supplying food to inmates, being an incidental activity to the activity of accommodation and relied on the Hon’ble Andhra Pradesh High Court decision in the case of Bharatiya Vidya Bhavan’s Residential Public School v. State of Andhra Pradesh.
➣ Under the Exemption Notifications above mentioned, Entry No. 12 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [ similar entry: Entry 13 of Exemption Notification No.9/2017- Integrated Tax-Rate dated 28.06.2017] reads as follows:
