In re Ramnath Bhimsen Charitable Trust (GST AAR Chhattisgarh)
The activity of providing accommodation services by the applicant in their hostel for which the applicant is collecting an amount below the threshold limit of Rs. 1000/- per day and no other charges are being collected for providing other allied facilities / services therein viz. canteen food, parking space for vehicles, coaching, library, entertainment etc. merits exemption as stipulated under Notification No. 12/2017-Central Tax (Rate) No. F-10-43/2017/CT/V(80), Naya Raipur, Dated 28.06.2017 under Serial No. 14, Chapter 9963. This amount received for such supply by the applicant falling under tariff heading 9963 qualifies being treated as nil rate tax exempted supply.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, CHANDIGARH
PROCEEDINGS
[U/s 98 of the Chhattisgarh Goods & Services Tax Act, 2017 (herein- after referred to as CGGST Act, 2017)]
No. STC/AAR/11/2018
Raipur, Dated .02/03/2019
The applicant M/s Shri Kamal Kishor Agrawal, for Ramnath Bhimsen Charitable Trust, Shri Ramnath Bhimsen Marg, Samta Colony, Raipur Chhattisgarh GSTIN 221800000121ARE has filed the application U/s 97 of the Chhattisgarh Goods & Services Tax Act, 2017 requesting advance ruling as regards :-
1. Whether the activity of providing the hostel on rent to various boarder is exempted? If it is exempted in such case, under which exemption notification the same is exempted.
2. Whether the activity of providing the hostel on rent to various boarder is taxable? If it is taxable, in such case, under which service access code the same is taxable?
2. Facts of the case:-
Shree Ramnath Bhimsen Charitable Trust is running girl’s hostel in the name of Shree Ramesh Sewa Sadan and Godavari Sewa Sadan (hereinafter referred to as ‘hostel’). The hostel is providing basic facilities which are required to stay and to study which include well-furnished residence, round the clock security, homely ambience, nutritious food, ample parking space etc. and in consideration, hostel is charging a nominal lump-sum fee of Rs. 6000/- per month per boarder. In other words hostel is charging a single amount for providing above-mentioned services to the boarders.
The hostel is being run by a charitable trust which is a non-profit entity, accordingly the income tax department has also given the exemption certificate as the hostel is not working for profit. Further, the hostel is carrying its activity in such a way that the occupants are members of hostel and hostel is collecting the charges for the maintenance. Thus, the hostel is working as a non-profit concern as whatever consideration is charged from the occupants, the same are only for meeting the maintenance and administrative expenses for running the hostel.
3. Contention of the Applicant:
1. Sons of Shree Bhimsenji Agrawal floated a trust in the name of Shree Ramnath Bhimsen Charitable Trust under the Indian Trusts Act, 1882 with the prime objective of charitable activities.
2. The Trust has started the girls hostel in the name of Shree Ramesh Sewa Sadan and Godavari Sewa Sadan hereinafter referred to as ‘Hostel’. The Hostel is situated at Samta Colony, Raipur, Chhattisgarh.
3. That keeping in view of the facts that the trust is carrying the charitable activities the Income tax Department has given the exemption certificate under section 12A of the Income Tax Act, 1961 as to the Hostel charges from the boarders in order to bear its maintenance and administrative costs. Accordingly the Trust is not supposed to pay any income tax on the receipts of the hostel, as the running of hostel is covered under the charitable activity.
4. Hostel has been established with the prime motto of upliftment of the girls who are residing outside their homes for educational curriculums. For this purpose, the hostel is designed and constructed so as to provide residence / accommodation to the girls who arrive at Raipur to pursue their education. Thus, the hostel is providing basic facilities required for stay to pursue studies, which includes well-furnished residence, round the clock security, homely ambience, nutritious food, ample parking space etc.
5. Further, in case, any boarder want to reside in hostel for few days, in such case, the boarder is allowed to stay, however, the border is supposed to pay nominal charges of Rs. 240/- per day.
6. The Word “Hostel” has not been defined either under the Central/State/Integrated/UT Goods and Services Tax Act. Further, the same is also not defined under General Clauses Act, 1897 and therefore, the meaning has been extracted from various dictionaries which are as under :-
i. Oxford Dictionary : “An establishment which provides inexpensive food and lodging for a specific group of people, such as students, workers, or travelers”
ii. Oxford Learner’s Dictionaries : “a building, usually run by a charity, where people who have no home can stay for a short time”
iii. Cambridge Dictionary : “a large house where people can stay free or cheaply a student hostel”
Vi Merriam Webster :- An inexpensive lodging facility for usually young travelers that typically has dormitory-style sleeping arrangements and sometimes offers meals and planned activities. Chiefly British a supervised institutional residence or shelter (as for homeless people).
v. In Collins Dictionary: “A hostel is a large house where people can stay cheaply for a short period of time. Hostels are usually owned by local government authorities or charities”.
Vi In common parlance: A hostel is an establishment which provides inexpensive food and lodging for a specific group of people, such as students, workers, or travelers. The word hostel can also used as a synonyms of cheap hostel, youth hostel, YMCA, YWCA, bed and breakfast, B&B, boarding house, guest house, pension etc. from the above definitions, it can be easily perceived that the hostel is meant for residential or lodging purpose or can also be interpreted as guest house, inn for the purpose of staying with amenities.
Vii. The Hostel due to implementation of GST was in hesitation about the tax implications to be followed when providing services in the ordinary course of its business.
1 1 That as mentioned above hostel is supplying service of renting or rooms to be used as residence along with ancillary facilities which are necessary with the main service. The applicant is getting rental income as consideration for providing such services which is nothing but nominal charges for bearing the maintenance and administrative costs of running a hostel.
1 2 Hostel is nothing but giving residential dwelling on rent to be used for the purpose of residence. The word hostel although has not been defined under Central/State/Integrated/UT Goods and service Tax Act, however as per the definition prescribed under Cambridge Dictionary as: ” A large house where people can stay free or cheaply: a student hostel”. The hostel is established only with a moto of providing residence to girl students that too solely for residential purpose against a nominal consideration hence it will be treated as providing the residential dwellings on rent.
1.3 That as mentioned above, in our considered view, since the hostel is providing the residence as hostel to girl boarders that too solely for residential purpose and therefore, the same is fully covered under the Entry No. 12 of Notification 12/2017 Central tax (rate) which prescribes that services by way of renting of residential dwelling for use as residence is exempted from GST. Therefore, the hostel is providing the residence to the occupants for which the hostel is charging the fee which is exempted from GST.
1.4 That the service which the hostel is providing is covered under the SAC code 9963 or Heading 9972 which is shown as Nil due to above- mentioned exemption notification. Thus it implies that the supply of service by way of renting for residential purpose is not subject to tax and in the instant case, undoubtedly, the Hostel is providing service for renting of residential dwelling for use as residence and thus falls under the supply of service which will be classified under the above-mentioned chapter heading which is subject to nil rate of tax.
1.5 That the Government in the interest of public at large, has prescribed a list of goods and services which are exempted from the purview of goods and service tax (GST) and accordingly the Government in order to exempt the specific establishments who are providing the low cost residence has exempted vide entry no. 14 of Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017. The Notification prescribes Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent is exempted from GST.
1.6 That to qualify the above-mentioned exemption the supplier of service must fall under this :
Services: – The Hostel is an inn which gives rooms on rent to girl students; hence it is duly covered under supply of service. Hotel, inn guest house, club or campsite;
In the present case, the hostel is providing the rooms to boarders and therefore, the question arises, whether the hostel will be covered under the hotel, inn guest house, club or campsite or not. In this regard the term hostel is neither defined in any of GST Acts, nor defined under the general Clause Act and therefore, we are borrowing the definition from Merriam Webster dictionary which defines hostel.
INN: – AN inexpensive lodging facility for usually young travelers that typically has dormitory-style sleeping arrangements and sometimes offers meals and planned activities. Thus, the learned and widely known dictionary has defined the hostel which specifically includes the inn and accordingly in our considered view, the hostel can also be interpreted as INN.
By whatever name called: – That the Government in his wisdom, while issuing the Exemption Notification has specifically taken the wide coverage so as to include even other related terms/places which is working as lodge/hotel/inn. In other words, the exemption notification is even applicable to other service provider who actually providing the services of giving the space on rent for residence and not falling under the definition/scope of hotel, inn, guest house club or campsite. As the Notification specifies the term ‘by whatever name called’ which implies that even other related services providers will be exempted even though the same is not known to be hotels, inn etc.
Therefore, in our considered view, exemption is not only to ‘Hotel, guest house etc., but also to ‘by whatever name called’ such as ‘Hostel’. For residential or lodging purposes, the hostel is providing residence to girl students and hence the same is nothing but used for residential and lodging purpose only. Having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent Since, hostel is charging 6000/- per month per child therefore, per day charges will approximately be Rs. 200/- per day. Thus, service provide by Hostel as mentioned will be classified under the above-mentioned chapter heading which is subject to nil rate of tax.
In support to above contention following circular of Govt. of India could be quoted:-
Circular: 32/06/2018-GST dated 12-Feb-2018, Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi
Services – GST in respect of services as decided in 25th GST Council Meeting -Clarification :-
