GST Update No 165 on GST payable on hostel services

Levying of tax on the educational sector is a delicate but an important concern because, education is not just a business, but more of a social task which polishes our future generation. Government plays an important role by providing free and compulsory elementary education to every child. With the passage of time, commercialization of education has increased tremendously wherein the industry is moving towards earning high profits. Amid all this chaos, to maintain a symmetry, GST Act has kept core educational services provided/ received by the educational institutions out of tax bracket by virtue of Exemption Notification No. 12/2017 dated 28.06.2017 while other services are taxable at 18%. One issue linked to the subject line was raised in front of Rajasthan AAR in the case of M/s Mody Education Foundation wherein the advance ruling was sought as regards to GST liability in the case of hostel services provided. The decision imparted in the said case is subject matter of our present update. The applicant (MEF) is registered as a Society under Societies Registration Act, 1860. It is established as an educational institution engaged in providing various services to the students. It is running a CBSE affiliated school from class 3rd to 12th . There is one more entity Mody University of Science & Technology (MUST) which provides educational services to its students. Since, MEF was having surplus infrastructure facility, the same is let out to MUST and rent collected in this respect is chargeable at 18% GST. MUST is collecting hostel fee from its students which includes lodging, boarding and serving food in the hall and is exempt under GST under Entry No. 66 of Notification No. 12/2017. MEF shall collect charges from students directly amounting to less than Rs. 1000/- per day. MEF is of the opinion that hostel facility charges are exempt from GST vide Entry 14 of Notification No. 12/2017. Reference was made to Circular No. 32/06/2018-GST dated 12.02.2018. The applicant contended that since the above entry of providing lodging, boarding and food facility along with hostel facility is covered under ambit of composite supply and stands exempted since the principal supply is exempted. It was argued that the said services belong to SAC Group 9963 and therefore, stands exempted vide Entry 14 of Notification No. 12/2017. However, services supplied independently to the clients do not belong to the said Group and hence, are liable to tax at applicable rates. Reliance was placed on decision of Karnataka AAR in the case of Re Srisal Luxurious Stay LLP 2020 (36) G.S.T.L.462. The AAR analyzed and examined the provisions of GST Act. It was analyzed that it falls withing the definition of supply as per Section 7 of CGST Act, 2017. It was clarified that since no mention of number of students will stay in room is declared by the applicant therefore, there is no clarity of tariff value of a unit of accommodation, GST rates as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 shall be applicable. Concluding the above, it was held that since ingredients of composite supply do not exist as there the said supplies are not naturally bundled, the above supply will be mixed supply and consequently, chargeable at the highest rate of tax. Reliance made by the petitioner on M/s. Srisai Luxurious Stay LLP., Karnataka vide Advance Ruling No. KKR ADRG 20/2020, dated 31.03.2020], M/s Logic Management Training Institutes Pvt. Ltd. Kerla vide Advance Ruling No. KER/76/2019, dated 20.05.2020 was rejected on the basis that the facts of the above cases are different from the present case. The above subject matter has been a mater of discussion since long. The Courts and AAR are flooded with the said cases wherein clarification is sought by the applicant on the above subject matter. To illustrate in the case of Resonance Eduventures Limited, Rajasthan AAR held that supply of coaching services along with printed material, test papers, unforms etc. amounts to mixed supply and therefore, chargeable at highest rate of tax. However, there are various divergent views on the same which are disheartening for the taxpayers. To quote, recently, Karnataka AAR in the case of Ghodawat Eduserve LLP (GSTARA 72/2019-20/B-51) stated that no GST shall be leviable on hostel accommodation since it is only residential dwelling and there is no other supply and hence, it is covered under Entry No. 14 of Notification No. 12/2017 dated 28.06.2017. It is worth mentioning over here that although the advance rulings are binding on the applicant who sought the same, yet, looking at the present scenario, clarification from Government is this regard will be highly appreciated.

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GST Update No 165 on GST payable on hostel services

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