TMI Blog2021 (1) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... s obvious that a person can live on the hostel without availing other services like food, TV, gym, etc; but to make ones stay more comfortable, the said ancillary services are availed by him - Rajasthan Authority of Advance Ruling has held that naturally bundled services are those services wherein one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. If current nature of supply of services is tested based on above factors, it can be ascertained that the provision of hostel accommodation could be a principal supply but ancillary services like food, gym, housekeeping, play room, cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundied naturally with principal supply. Rajasthan Authority of Advance Ruling has placed reliance on the ruling of West Bengal Authority for Advance Ruling in the case of Sarj Educational Centre [ 2019 (2) TMI 1605 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL ] involving similar facts and circumstances, wherein the applicant was engaged in supplying food and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility gets ensured, need for food and other allied facilities arises. Neither the appellants wish to charge any separate amount for supply of food or other general facilities from the students nor there is any bifurcation of the charges for residential accommodation along with food and other facilities provided to the students. Further, there would be no option provided to the students to opt for hostel accommodation without food or other facility. All students would pay a consolidated amount of ₹ 17,000/- per month whether or not they use the food or any other facility. Similarly, there is no option for any person to take only food or any other facility without being resident of hostel. 3.3 Since the hostel charges recovered from the student per day does not exceed ₹ 1000/-, the activity of hostel accommodation is exempt from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended read with CBEC Circular No. 32/06/2018-GST, dated 12.02.2018. However, there is no specific clarification on applicability of exemption on incidental food facility if provided along with principal supply of hostel accommodation especially when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants principally provide hostel accommodation alongwith incidental supply of food to all students wherein a consolidated amount of ₹ 17,000/- per month is charged from the students. There is no system wherein student is provided with a choice to opt for hostel accommodation without incidental supply of food. In other words, neither there is any choice with the student to opt for standalone hostel accommodation without opting for supply of food nor there is any bifurcation of charges for food provided to the students. 4.2 Further, following additional amenities are also available which are part and parcel of the hostel accommodation. No separate charge is recovered from the students for the same: TV in dining hall Playroom Gym Housekeeping of entire hostel premises Room cleaning Washing/ dry-cleaning of bed sheets linen of rooms provided by owner None of these amenities are mandatory. These are provided as complimentary amenities and there is no obligation as such if any of these are discontinued. The hostel accommodation is inbuilt with above facilities. 4.1.3 It is submitted that there is no dispute to the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsportation and insurance is inclusive in the scope of supplier or not. Irrespective of above it is covered by composite supply of goods where the packing material, transportation, insurance is considered as incidental. The logic behind it is that basically the customer approached for supply of goods and therefore, that is the principal supply and other facilities are incidental to the principal supply hence, an example of composite supply. 4.1.7 As against this the mixed supply is defined under section 2(74) which read as under: 2(74) mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration. - A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; 4.1.8 Perusal of definition of mixed supply shows that here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal supplies are individually liable to GST, but medical services as a whole are not made liable to GST being principal supply. This is inspite of the fact that in many cases the same hospital or other hospitals may not provide medical services under the single package but may be charging separately for doctor services, medicines, rooms etc. and inspite of that it is a settled law that where all these are part of a package then it is an example of composite supply where medical services are principal supply and no GST is payable on entire package. c) Airlines are providing air travel services along with certain free refreshment/meals during transit and also provides in flight entertainment services on Screen etc., keeps aeroplane neat and clean through housekeeping service and also washes and dry-cleaning seat covers etc. These are undisputedly considered as a composite supply where principal supply is that of travel by air and accordingly classified and taxed. This is inspite of the fact that many airlines are not supplying any snacks/refreshments as a part of package but charges separately for such supply of food. However, those airlines where snacks/ meals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12 Further, C31C has elaborated in its E-flyer issued on Composite and mixed supplies after introduction of GST as under: Hotel provides a 4-D/3-N package with the facility of breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation. Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below - The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expects such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her facilities 4.1.14 The term principal supply has been defined under Section 2(90) of the CGST Act, 2017 as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. Here, the principal supply is the renting of hostel accommodation services and food other facilities are ancillary to principal supply of hostel accommodation services. Thus, the accommodation facilities at hostel is the only principal supply and all the other facilities are interrelated as they are provided exclusively to the occupants of hostel only, without any extra charge. It is reiterated that no other charges other than above amount of ₹ 17,000/- is collected from the occupants on account of other allied facilities being provided. 4.1.15 It can be seen from the above that all factors which are relevant to determine the scope of composite supply are fulfilled in the present case of hostel accommodation along with food other facility. It is submitted that need for food facility cannot arise unless there is need of hostel accommodation. The appellants do not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 511 - AUTHORITY FOR ADVANCE RULINGS, KERALA , to hold that supply of medicines and allied items like food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of health care service and not separately taxable. 4.1.18 In the case of M/s. ALL RAJASTHAN CORRUGATED BOARD AND BOX MANUFACTURERS ASSOCIATION, reported at 2019 (7) TMI 847 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN , the question before Rajasthan Advance Ruling authority was whether the Service provided by the applicant to the delegates and exhibitors wherein all-inclusive registration fees is charged for technical seminars, access to exhibition, hotel room accommodation, airport pickup and drop, cultural programmes etc. is a composite supply or not. The authority answered in affirmative and held that the supply is composite supply with principal supply being organizing conference. 4.1.19 The same principle is applicable to health care services provided to in-patients wherein food, medicines, rooms, T.V. in rooms/common area, air-conditioning in room/common area, parking facility etc. are also provided to in-patients as part of the treatment. In this case also, healt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary plan sanctions from Local self-Government bodies and then building individual house for customer, said bundled activity exempted from Service Tax, construction of individual house being prime service - Had there been separate agreement, services provided for obtaining sanctions, would have been taxable 4.2 The Composite Supply of that hostel accommodation along with food facility would be exempt as per Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended. 4.2.1 A perusal of above facts shows that hostel accommodation along with food facility would be treated as composite supply, it is relevant to determine the taxability on such composite supply. Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28/06.2017 as amended provides that services of rental accommodation having value of supply upto ₹ 1000/- per day would be exempted from GST. The relevant extract is reproduced below: Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2020 on behalf of the appellant and reiterated the written submission. They submitted additional submission of CBEC Flyer No. 40 dated 01.01.2018 and Service Tax Education Guide. The relevant portion which has been stressed upon by the appellant are reproduced below: CBE C Flyer No. 40 dated 01.01.2018: Composite and Mixed Supply in so far as Education is concerned. Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 2(30) read with section 8 of the CGST Act, 2017. Such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business. Therefore, the bundle of services will be treated as consisting entirely of the principal supply, which means the service which forms the predominant element of such a bundle. In this case since the predominant nature is determined by the service of education, the other service of providing residential dwelling will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s able to capture the entire essence of the package. Thus the service may be judged as convention service and chargeable to full rate. However it will be fully justifiable for the hotel to charge individually for the services as long as there is no attempt to offload the value of one service on to another service that is chargeable at a concessional rate. 9.2.2 Services which are not naturally bundled in the ordinary course of business The rule is - If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax. Illustrations - A house is given on rent one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. The elements are normally advertised as a package. The different elements are not available separately. The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. 6. DISCUSSION AND FINDINGS 6.1 We have carefully gone through the Appeal papers filed by the Appellant, the Ruling of the Authority for Advance Ruling, Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion service. Accordingly, the appellant has requested to set aside/ modify the impugned Advance Ruling passed by the Rajasthan Authority of Advance Ruling and declare the impugned package a composite supply wherein Hostel Accommodation is principal supply and food and other facilities are only incidental to it. 6.4.1 Before examining the contention of the appellant it is imperative to go through the relevant provision of the CGST Act which defines the term Composite supply and Mixed supply. We find that as per section 2(30) of CGST Act, 2017 composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration .- Where goods are packed end transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; In the above illustration, it is obvious that the packing material or the insurance cannot be supplied separately if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. If current nature of supply of services is tested based on above factors, it can be ascertained that the provision of hostel accommodation could be a principal supply but ancillary services like food, gym, housekeeping, play room, cannot be said to arise naturally with the principal service of hostel accommodation and therefore are not bundied naturally with principal supply. Rajasthan Authority of Advance Ruling has placed reliance on the ruling of West Bengal Authority for Advance Ruling in the case of Sarj Educational Centre = 2019 (2) TMI 1605 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL involving similar facts and circumstances, wherein the applicant was engaged in supplying food and other services, etc and it was held that they are not naturally bundled with the lodging service. All these components are independent of each other. The said ruling has been upheld by the Appellate Authority of Advance Ruling of West Bengal. 6.6 The appellant has also placed reliance of various case laws pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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