A.1. Introduction
Hostel accommodation – students or working professionals – enjoyed non-taxability under pretext of a) per day tariff exemption [less than 1000 per day] and b) residential dwelling used for residence. Interpretation of dwelling / residence was done by Hon’ble Karnataka High court in a recent judgment in Taghar Vasudeva Ambrish vs AAAR. Present dust around taxability/ exemption on hostel accommodation arose in light of amendments made w.e.f. 18-Jul-2022 as per recommendations of 47th GST Council Meeting.
A.2. Controversy around
Basic issue is whether accommodation services provided by hostel can be treated at par as with hotel or can it be treated as residential accommodation. Circular F. No. 354/17/2018-TRU-12-Feb-2018 provided clarification on hostel accommodation as under:
| Issue: Is hostel accommodation provided by Trusts to students covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate). |
| Clarification: Hostel accommodation services do not fall within the ambit of charitable activities as defined in para 2(r) of notification No. 12/2017-CT (Rate). However, 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 are exempt. Thus, accommodation service in hostels including by Trusts having declared tariff below one thousand rupees per day is exempt. [Sl. No. 14 of notification No. 12/2017-CT (Rate) refers] |
The Board clarified that accommodation provided on per day tariff or equivalent will be exempted. [to counter]
The issue becomes more complicated when hostel rooms are provided on a multiple sharing basis (twin or more). [to reply]
A.3. Classification
Guidance can be taken from classification annexure of Rate Notification No. 11/2017 and explanatory notes thereto to understand the true nature of supply of hostel accommodation.
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Service code 997211 Rental or leasing services involving own or leased residential property [under Real Estate service-9972] includes rental or leasing services concerning residential properties by owners or lease holders houses, flats, apartment buildings, multiple-use buildings that are primarily residential, residential mobile home sites. It is further stated that ‘This service code does not include: – accommodation services provided by operating hotels, motels, rooming houses, school dormitories, camp sites and other lodging places, cf.99631’ |
| 9963 Accommodation, food and beverage services
99632 Other accommodation services: This group includes accommodation services for persons for a longer period of time and also includes semi-permanent residence in boarding houses and residential clubs. |
| 996321 Room or unit accommodation services for students in student residences: This service code includes room or unit accommodation services for students in student residences attached to schools and universities. |
| 996322 Room or unit accommodation services provided hostels or camps or paying guests |
A.4. Taxability and Exemption
| Relevant entries under Rate notification 11/2017-CTR | |||
| Sl No. | Chapter, Section or Heading | Description of Service | Rate (per cent.) |
| 7 | Heading 9963 (Accommodation, food and beverage services) | [(i) Supply of ‘hotel accommodation’ having value of supply of a unit of accommodation [*Omitted w.e.f. 18-Jul-22- “above one thousand rupees but”] less than or equal to seven thousand five hundred rupees per unit per day or equivalent. | 6 |
| vi)Accommodation, food and beverage services other than (i) to (v) above | 9 | ||
| 16 | Heading 9972 | (iii) Real estate services other than (i) and (ii) above. | 9 |
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| Related exemptions in notification no. 12/2017-CTR, dated: 28.06.2017 (as amended) | ||
| Sl. No. | Heading + Service Code (Tariff) | Description of Services |
| 12 | Heading 9963 or Heading 9972 | Services by way of renting of residential dwelling for use as residence w.e.f. 18-07-22 [except where the residential dwelling is rented to a registered person]. |
| 14* | *Heading 9963 | *[Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having “value of supply” of a unit of accommodation below or equal to one thousand rupees per day or equivalent.] |
| *omitted w.e.f. 18-Jul-22 | ||
A.5. Karnataka HC View
In Taghar Vasudeva Ambrish vs AAAR, dtd. 07-Feb-2022, Hon’ble Karnataka High Court gave findings that:
i) Expression ‘residence’ and ‘dwelling’ have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression ‘residential dwelling’ and it cannot be held that the same does not include hostel which used for residential purposes by students or working women.
ii) The exemption notification does not require the lessee itself use the premises as residence.
iii) In Kishore Chandra Singh Vs Babu Ganesh Prasad Bhagat AIR 1954 SC 316, it is 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.
iv) 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.
A.6. Analysis
On the basis of combined reading of both notifications (Rate and Exemption) with the mandated classification, alongwith Taghar Vasudeva Case supra it can be deduced that:
1. Hotel and Hostel/ paying guest services are covered under the ambit of Chapter 9963, albeit covered under different Service Accounting Codes.
2. Slab rates under rate notification 11-2017-CTR, (less than or above 7500/-, 12% or 18% as the case may be) are applicable only to hotel accommodation and not to hostel services.
3. Board circular dated 12-Feb-18 was primarily issued w.r.t. applicability of exemption as charitable activity to hostel services [with declared tariff] provided by Charitable trust to students.
4. Exemption is granted to renting of a residential dwelling for use as residence.
5. Hostel accommodation services squarely fall under the category of residential accommodation and are exempted under the Act.
6. In the opinion of author, it makes no difference whether accommodation is occupied singly or is multi occupancy.
A.7. RCM Provisions
| RCM Notification No. 13/2017- CTR, dated: 28.06.2017 | |||
| Sl. No. | Category of Supply of Services | Supplier of service | Recipient of Service |
| [5AA]
Introduced w.e.f. 18-Jul-22 |
Service by way of renting of residential dwelling to a registered person. | Any person | Any registered person |
W.e.f. 18-Jul-2022, renting of residential dwelling to any registered person is covered under reverse charge mechanism (RCM) and there is no exemption on renting of residential dwelling to such [registered] person. Thus the GST registered hostel operators and space sharing companies taking hostels on rent for further provisioning of hostel services will be liable to pay tax under RCM on the said activity. However, hostel services provided by them to students and like will be exempted.
[This article is for information only and should not be treated as a legal/ professional opinion nor it can be construed as solicitation in any manner]
[Author is a Practicing Advocate specializing in the area of Indirect taxes]
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