GST Update on taxability of charges collected by hostel 90/2020-21

The hostel facilities are often provided with couple of ancillary services such as security services, canteen services, parking services etc. The question arises is the taxability of the said services when provided as a whole under single package. This issue regarding leviability of GST on the charges collected by hostel for providing a range of services was placed before the Chhattisgarh Advance Ruling in the case of M/s Ramnath Bhimsen Charitable Trust. The decision given in the advance ruling is the subject matter of discussion of present update.

The applicant charged lumpsum amount of Rs. 6,000/- per month per child for providing accommodation services to the students along with ancillary facilities such as food, security, parking etc. The question raised before AAR was whether the charges received are exempt and if the said charges are taxable, then the SAC code and rate of GST applicable on said charges.

The applicant contended that since the accommodation charges per day arrive at Rs. 200/-, the same is eligible for benefit of exemption available under entry no. 14 of the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017 to services provided 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. The meaning of hostel as defined in various dictionaries was also stated so as to prove that the hostel is covered under the entry no. 14.

The AAR after considering the submissions analysed the entry no. 14 of the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017. It was found that since the meaning of hotel is not defined in CGST Act, the general meaning is to be considered and accordingly, the hostels fall under the entry no. 14 as it covers the inn or guest house by whatever name called. Reliance was also placed on the clarification issued vide Circular No. 32/06/2018-GST dated 12.02.2018 wherein it was clarified that hostel accommodation provided by trusts to students is exempt if the declared tariff is below one thousand rupees per day. Consequently, it was concluded that the present activity is a composite supply wherein the principal supply is that of providing accommodation services to students and so the entire charges are exempt under serial no. 14 of the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017.

It is observed that usually advance rulings are pro-revenue but this decision has been given by properly analysing the statutory provisions of GST Law. Whenever the concept of composite or mixed supply comes into picture, the assessee is in dilemma as to whether the transaction is to be considered as composite supply or mixed supply because different GST rates are applicable in both the concepts. While composite supply requires application of GST rate of principal supply, the mixed supply requires application of highest GST rate. In the present case, services of food are naturally bundled and are generally provided by the hostels and so AAR has aptly considered the transaction as principal supply which is exempt from levy of GST under entry no. 14 of notification no. 11/2017-Central Tax (Rate) dated 28.06.2017.

This issue was also taken up in the service tax era and the author of this update has dealt with this matter earlier also and it was decided by appellate authority that when the short term accommodation is below Rs. 1000/- then the GST is not payable on the same. Alternatively, it was also pleaded that the hostel is being used for residential purpose, hence the service tax should not payable on the same. But the learned Commissioner has accepted the first contention and given us relief. However, we can see the settled position in service tax is again taken up and litigated by the department on pretext that law has been changed. Many issues like director remuneration, mutuality concept on clubs etc. are again coming up for litigation though these issues were settled in Service tax regime.

This is solely for educational purpose.

You can reach us at www.capradeepjain.com, at our facebook page on https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/as well as follow us on twitter at https://www.twitter.com/@capradeepjain21 and on linkedin https://www.linkedin.com/in/ca-pradeep-jain-b6a31a16/

Comments

GST Update on taxability of charges collected by hostel 90/2020-21

Post a Comment

Query