HOSTEL ACCOMMODATION PROVIDED TO STUDENTS AND WORKING WOMEN - EXEMPTED FROM GST?

[Mr. M. GOVINDARAJAN]

 IN RE: M/S. 2 WIN RESIDENCY LADIES HOSTEL - 2023 (11) TMI 1200 - AUTHORITY FOR ADVANCE RULING, TAMILNADU , the applicant is  running a ladies residential hostel for college students and working people.  The applicant is also providing certain ancillary services such as housekeeping, security arrangements, Television, parking facility etc.  The charges of Rs. 3000/- is being collected per inmate per month for providing all the above facilities including electricity charges; the charges collected are per bed charges and these charges are also dependent on number of persons sharing the room; the invoices to the habitants are raised accordingly.

The applicant claimed in its application exemption for the accommodation services rendered by him from the levy of GST.  The applicant submitted the following before the Authority for Advance Ruling-

• The ‘hostel’ accommodation which falls within the purview of the ‘Hostels Regulation Act’ cannot be equated with that of a ‘hotel accommodation which falls within the realm of Tamil Nadu Shops & Establishments Act, 1947. 
• Under the erstwhile Service Tax regime, the ‘services by way of renting of residential dwelling for use as residence’ was included in the negative list under clause (m) of Section-66D of the Finance Act 1994. 
• The residential accommodation falls under the unconditionally exempt category.  The exemption shall cover services by way of renting of residential dwelling to a registered person where the registration person is Proprietor of a Proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence and to such renting is on his own account and not that of the proprietorship concern.

• The term ‘residential dwelling’ is  to be interpreted in normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, Inn, guest house, campsite, house, lodge, house boat or like places meant for temporary stay.
• The hostels are run with a motive to provide safe residence to students and working women/men and charges collected are nominal; Food given is the same for all occupants and no choice in menu given.
• The buildings used as hostels are ‘residential buildings’ as per the Zoning Regulations as stated in Rule 33 of the Tamil Nadu Combined Development and Building Rules, 2019 and are specified in Annexure XVIII, wherein under the Residential Use Zone, Entry No.(vii) is given Working women’s hostels, old age homes’. The property tax receipts categorize hostels in ‘residential’ zone only.
•  The hostels attached to educational institutions are exempt from GST and their hostel which essentially caters to students at very nominal charges in contrast to hostels attached to educational institutions also has to be exempt from the levy of GST and ought to fall outside the scope of levy.

The applicant relied on various judgments.

The applicant’s jurisdictional State Authority had submitted the following submissions before the Authority for Advance Ruling-

• The motive of the Applicant is to run the ladies hostel against the CONSIDERATION and they have also admitted that they are receiving some amount for rendering accommodation and food services, which clearly falls under the ambit of definition of SUPPLY as provided in Section 7 of the TNGST /CGST-Act.
• The applicant registered under various acts to run its business.
• Their services does not fall under SERVICES BY WAY OF RENTING OF RESIDENTIAL DWELLING FOR USE AS RESIDENCE since they are letting out a single room to various inmates for various time period for a pecuniary benefit.
• In this type of transactions, they are not entering any rental agreement with the inmates for the transfer of rights of the specified place for a specific period and hence it does not cover the definition of residence which is controlled by the Tamil Nadu Rent Regulation Act.
• Since the definition of Hotel accommodation was broadly expanded in the Notification No. 20/2019 Central Tax (Rate) dated 30.09.2019, wherein all the accommodation services including hostel accommodations services were brought in to the tax net @ 12% and hence rate of tax for the hostel accommodation services may be taxable @ 12% with effect from 30.09.2019 onwards.

The applicant thus claimed  renting of residential dwelling for the use as residence become failure.

The Applicant’s jurisdictional Central Authority has submitted the following before the Authority for Advance Ruling-

• The applicant’s hostel to be eligible for exemption is to comply with the following conditions-

• Service by way of renting of residential dwelling for use as residence - Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 covering Heading 9963 or Heading 9972 
• Service by way of renting of residential dwelling for use as residence - Entry 13 of Exemption Notification No. 09/2017 - Integrated Tax (Rate) dated 28.06.2017 also cover the heading 9963 or Heading 9972.

• The term ‘residential dwelling’ is one where people reside treating it as a home or abode.
• A common understanding of a hostel is an establishment which provides inexpensive accommodation to persons like students, workers etc.
• The applicant’s hostel has been constructed with the intention of providing hostel accommodation which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation.
• The hostels even though given for residential or lodging purposes are commercial places registered as “commercial establishments” for the purposes of electricity, water, trade licence etc. Therefore, the applicant’s hostel cannot be termed as ‘residential dwelling’ and has to be treated as a commercial place only.
• In the facts of this case, it is rented out for use as a hostel facility or paying guest accommodation facility. As it is not rented out for use as residence but rented out as a hostel/paying guest accommodation facility, the exemption can’t be extended. 

The Authority for Advance Ruling gave personal hearing to the applicant. The Authority for Advance Ruling considered the submissions of the applicant, the State authority and Central Authority. The Authority for Advance Ruling considered the question as to whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not.

The Authority for Advance Ruling observed that the term ‘residential dwelling’ has not been defined either under CGST Act or under Notification No. 12/2017. However, under the erstwhile service tax law, in paragraph 4.13.1 of the ‘Taxation of Services: An Education Guide dated 20.06.2012’, issued by the CBIC, the expression residential dwelling’ has been interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp - site, lodge, house boat, or like places meant for temporary stay.  A common understanding of the term ‘residential dwelling’ is one where people reside treating it as a home.   Renting of residential dwelling documents will not include amenities like food, housekeeping, or laundry etc., whereas, a hostel is that of an establishment which provides living accommodation to a specific categories of persons such as students and workers.   The Applicant has rented out the premises with the intention of providing hotel accommodation which is more akin to sociable accommodation rather than what is typically considered as residential accommodation.

Even though accommodation and residence seems to be synonymous, there is a subtle difference between the two. An accommodation is a location where someone is accommodated or provided with lodging.  Hostels are nothing but accommodations which provide temporary lodging to the inmates.  In the instant case, the residential homes (for use as a residence) have been converted into a commercial premises ic., hostel accommodation, thereby losing its status as ‘residence dwelling’ and has become a business premises comparable to a hotel.   There is no relationship of landlord and tenant between the hostel owners and inmates in as much as the inmates of hostels have no obligation to maintain or repair the fixtures and fittings and there is no division of maintenance responsibility between the hostel owners and inmates which is normally followed in the ease renting of residential dwelling to a family or a person. 

The Authority for Advance Ruling held that-

• hostel accommodation is not equivalent to residential accommodation and hence the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No. 09/2017 IT(Rate) dated 28.06.2017, as amended.         
• The supply of services by way of providing hostel accommodation will fall under Tariff heading 9963 and is taxable (a 9% CGST + 9% SGST under Sl.No. 7(vi) of the Notification No. 11/2017, Central Tax (Rate), dated 28.06.2017, as amended vide Notification No. 20/2019 - Central Tax (Rate), dated 30.09.2019.
• The activity of supply of in-house food to the inmates of the hostel amounts to providing services in a composite manner and the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @ 18%, will be tax rate for the composite supply provided by them.