Hostel accommodations are exempt from GST purview: AAR Maharashtra

Summary: The Maharashtra Authority for Advance Rulings (AAR) in the case of M/s Maharashtra Jain Education Society ruled that hostel accommodations provided to students for a minimum period of 90 days are exempt from GST under Entry No. 12 of Notification 12/2017-Central Tax (Rate). This exemption applies to both new and old students for a stay of 10 months or more. However, new students availing accommodation for one to two months during vacation periods do not qualify for the exemption. The ruling relied on earlier judgments, including the Karnataka High Court case, which recognized hostel accommodations as residential dwellings, thereby exempting them from GST. The GST Council in its 53rd meeting further clarified that accommodation services under INR 20,000 per person per month, provided for a minimum continuous period of 90 days, would be exempt starting July 15, 2024. For periods prior to this date, GST liability for similar accommodations was regularized. This ruling ensures clarity for educational institutions regarding GST applicability on hostel services and establishes key conditions for availing the exemption.

The Maharashtra AAR, in the matter of In re., M/s Maharashtra Jain Education Society [Application No. 91 of 2022-23/2024-25/B-51 dated July 31, 2024], ruled that hostel accommodations for a duration of 10 months to both old and new students are eligible for exemption under S. No. 12 of Notification 12/2017-Central Tax (Rate) dated June 28, 2017 (“the Exemption Notification”). Similarly, accommodations for old students staying for one or two months during the vacation period also qualify for exemption. However, accommodation for new students staying for one or two months during the vacation period do not qualify for the exemption under the Exemption Notification.

Facts:

M/s Maharashtra Jain Education Society, (“the Applicant”) was engaged in providing accommodation services in the hostels run by the Society. Such services were provided only to the students studying in 11^th standard up to the students who were pursuing graduation, for the academic year from 1^st July to 30^th April and in the School/ College vacation period, from 1^st May to 30^th June. These services were provided as per the needs of the students either for examination or for undergoing educational courses.

Further, the fees for hostel accommodation services charged from the students was Rs. 1,10,000, for the academic year from 1^st July to 30^th April. A refundable Security Deposit of Rs. 10,000 was taken from the students of the hostel.

A concession in fees was provided to the students in the AAR Order of M/s. Maharashtra Jain Education Society [Application no. 91 of 2022-23 dated December 19, 2022] based on various factors. The fees for hostel accommodation services charged from the student was Rs. 10,000 per month for the vacation period from 1^st May to 30^th June as per the needs of the students either for examination or for undergoing educational courses. In this case also, a refundable Security Deposit of Rs.10,000 was taken from the students.

In the current case, it is to be noted that Rs. 3,23,40,000 was the estimated fees to be collected for residential accommodation for the period of stay for 10 months during the FY 2022-23 and Rs. 10,00,000 fees were estimated to be collected for the period of stay for 2 months during the FY 2022-23 and Rs. 10,00,000 was to be collected for the period of stay during FY 2022-23.

Hence, the Applicant filed an application for applicability of GST on supply of services divided into three broad categories below:

1. Duration of stay of 10 months to both old and new students.
2. Duration of stay of one to two months during the vacation periods to new students.
3. Duration of stay of one to two months during the vacation periods for old students who have already stayed in hostel for duration of 10 months.

Issue:

Whether the hostel accommodation services are exempt under GST?

Held:

The Maharashtra AAR, in Application No. 91 of 2022-23/2024-25/B-51 held as under:

• Relied on, the case of M/s Thai Mookambikaa Ladies Hostel v. Union of India and others [W.P. No. 28486 of 2023 dated March 22, 2024], the Hon’ble Karnataka High Court held that the hostel accommodation with compulsory supply of meals with hostel amenities as described is composite supply actually is renting of residential dwelling for residential purpose, and eligible for exemption. The Court further relied on the Orders of AAR, Rajasthan in case of M/s Mody Education Foundation [Advance Ruling No. RAJ/AAR/2022-23/04 dated May 19, 2022], and M/s Kalani Infrastructure Private Limited, [APPEAL No Raj/AAAR/ APP- 05/2019-20 decided on May 12, 2020] wherein it was decided that such supplies are of hostel accommodation with supply of food are mixed supplies and not eligible to benefits of S. No. 12 of the Exemption Notification.
• Observed that, the supply of hostel accommodation services to students with mandatory supply of meals and other necessary amenities, for duration of stay of 10 months for both old and new students is covered by the S. No. 12 of the Exemption Notification. Hence, it is exempt from GST.
• Relied on, the case of M/s Taghar Vasudeva Ambrish v. Appellate Authority for Advance Ruling, Karnataka and Others [W.P. 14891 of 2020 dated February 07, 2022], wherein the Hon’ble Karnataka High Court relied on the case of the Hon’ble Supreme Court in Kishore Chandra Singh v. Babu Ganesh Prasad Bhagat [AIR 1954 SC 316] which has held that expression residence only connotes that a person eats, drinks and sleeps at that place and it is not necessary that he should own it. The aforesaid decision was also referred to by the Hon’ble Bombay High Court in Bandu Ravji Nikam Acharyaratna Deshbushan Shikshan Prasark Mandal [W.P.No.4194 of 1989, dated September 12, 2002] wherein it was held that hostel is used by the students for the purposes of residence. The students use the Hostel for sleeping, eating and for the purpose of studies for a period ranging between 3 months to 12 months. In the hostels, the duration of stay is more as compared to hotel in guest house, club etc. Further, since the hostellers are staying in the room for months together, it cannot be construed as non-residential unit and certainly it is a residential dwelling as provided in the Exemption Notification.
• Relied on, the case of Jeewanti Pandey v. Kishan Chandra Panday [1981 SCC (4) 517], the Supreme Court observed that in its ordinary sense ‘residence’ is more or less of a permanent character. The expression ‘resides’ means to make an abode for a considerable time, to dwell permanently or for a length of time, to have a settled abode for a time. It is the place where a person has a fixed home or abode. Where there is such fixed home or such abode at one place the person cannot be said to reside at any other place where he had gone on a casual or temporary visit. If a person has no established home and is compelled to live in hotels, boarding houses or houses or others, his actual and physical habitation is the place where he actually or personally resides.
• Noted that, the supply of hostel accommodation services to students with mandatory supply of meals and other necessary amenities, for duration of stay of 1 to 2 months during vacation period to new students, is not eligible for benefits of exemption as per S. No. 3 of the Exemption Notification.
• Held that, it was seen that the earlier tenure of residence of 10 months was extended for further period of a month or 2 months by the old students, this will not change the nature of their earlier stay of 10 months to temporary accommodation status. Hence, such supplies considering the earlier tenure 10 months will also be long term tenure and are considered as residence and eligible for benefits of exemption as per Entry at S. No. 3 of Exemption Notification.

Our Comments:

The services under heading 9963 by a hotel, inn, guest house, club or campsite for residential or lodging purpose, having declared tariff of a unit below Rs. 1000 per day or equivalent were exempt till July 17, 2022 vide Entry no. 14 of the Exemption Notification.

However, CBIC vide Circular No. 354/17/2018-TRU February dated 12, 2018 clarified to consider the hostel accommodation at par with hotel accommodation. As a result, the service of hostel accommodation prized below Rs. 1000/- a day were then taxable @ 12% w.e.f July 18, 2022 provided charges were Rs. 7500/- or less per day.

However, in the case of M/s Taghar Vasudeva Ambrish v. Appellate Authority for Advance Ruling, Karnataka and Others [W.P. 14891 of 2020 dated February 07, 2022], the Hon’ble Karnataka High Court had held that the service of hostel accommodation as the services by renting of residential dwelling for use as residence. Hence, it is exempt from GST.

The Department has filed civil appeal before the Hon’ble Supreme Court of India against the Hon’ble Karnataka High judgement. The matter was sub-judice.

Hence, the GST Council in its 53^rd meeting recommended to exempt accommodation services less than or equal to INR 20,000/- per person per month w.e.f. July 15, 2024, provided that the accommodation service is supplied for minimum continuous period of 90 days.

Further, a clarification was provided vide Circular 228/22/2024-GST dated July 15, 2024 on the recommendation of the GST Council, the GST liability on accommodation is regularized on an “as is, where is basis” for periods July 1, 2017 to July 14, 2024 where the value of accommodation is less than or equal to Rs. 20,000 per person per month and such accommodation is provided for a minimum continuous period of 90 days.

Hence, the exemption Entry S. No. 12 of the Exemption Notification was amended, which reads as here under:

Services by way of renting a residential dwelling for use as a residence, except where the residential dwelling is rented to a registered person.

Explanation 1. For the purpose of exemption under this entry, this entry shall cover services by way of renting a residential dwelling to a registered person where:

1. The registered person is the proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and
2. Such renting is on his own account and not that of the proprietorship concern.

Explanation 2.: Nothing contained in this entry shall apply to:

1. accommodation services for students in student residences;
2. accommodation services provided by hostels, camps, paying guest accommodations, and the like.

Hence, until, July 14, 2024, Heading 9963 as well as Heading 9972 are covered under Exemption Notification. However, with effect from July 15, 2024, the exemption entry covers only services classifiable under Heading 9972.

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