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TMI Blog2020 (1) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure Pvt. Ltd., A-14-A, Road No.1, Indraprastha Industrial Area, Kota, Rajasthan (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (a), (b) & (e) given as under: - (a) Classification of Services; (b) Applicability of a notification issued under the provisions of this act; (e) Determination of liability to pay tax on any services; * Further, the applicant being a registered person (GSTIN is 08AACCK1540L1ZK as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: * That Fortuna Icon, a unit of the applicant is running a hostel for residential accommodation for students. They are registered in GST having GSTIN 08AACCK1540L1ZK. The applicant wishes to charge a consolidated amount of Rs. 17,000/- per month from the students against provision of hostel accommodation for residence purposes which would also include ancillary activity of food facility. * Primarily the stu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hostel accommodation, the question before Advance ruling authority is whether the supply of hostel accommodation alongwith food facility would be treated as 'composite supply' as defined under CGST Act, 2017. * To determine this, it is pertinent to refer to the concept of 'composite supply' provided in GST law. Section 2(30) of CGST Act, 2017 defines 'composite supply' as under: "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 and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; A perusal of the above definition implies that a supply of goods and/or services will be treated as composite supply if it fulfills the following three criteria: (a) Supply of two or more goods and services together. (b) Goods or services are naturally bundled, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice 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 offered by a majority of airlines. The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that 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. For example, service of stay in a hotel is 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 If current nature of transaction in question is tested based on above factors, it would be amply clear that the provision of hostel accommodation along with food facility is a 'composite supply' where hostel accommodation is the principal supply and food facility is ancillary activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 8 of the CGST Act, 2017 which provides that tax liability on a composite supply would be that of what is applicable on principal supply. Hence, the same tax treatment would apply to entire package as applicable to hostel accommodation services. * It is further relevant to submit that the Hon'ble Chhattisgarh Authority for Advance Ruling under GST, Raipur in the matter of Kamal Kishor Agarwal, has issued an advance ruling No. STC/AAR/11/2018-Raipur dated 02.03.2019 reported at 2019 (24) G.S.T.L. 496 (A.A.R. - GST) on the similar issue of the ancillary services of food and parking provided to the students by the Charitable Trust along with hostel accommodation. The ARA held as under: "Hostel run by charitable trust - Providing residence to students on rent - Nominal lump sum amount of' 7000 and ' 6000 per month per bed depending upon number of beds per room, charged for giving residence - Ancillary services such as food, parking also provided without charging any amount over arid above lump sum charges - As per C.B.E. & C. Circular No. 32/ 06/ 2018- GST, dated 12-2-2018, hostel accommodation service would not fall within ambit of charitable activities as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h food facility would be exempt from GST under aforesaid Notification. * It has been further clarified by CBIC vide Circular No. 32/06/2018-GST, dated 12th February, 2018 that accommodation services in hostels having declared tariff below Rs. 1000/- is exempt from GST. * In view of the above facts and applicant's interpretation and understanding of the same, it is submitted that the provision of hostel accommodation along with food facility is a composite supply which is exempt from GST under Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended read with CBIC Circular No. 32/06/2018-GST, dated 12th February, 2018. * The applicant also provided some additional submission vide dated 12.12.2019, received in this office on 17.12.2019 regarding list of other amenities provided along with hostel accommodation and some case laws. 2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT a) Whether provision of hostel accommodation along with food facility to the students wherein consolidated amount is charged from the students is a composite supply where principal supply is that of rent of hostel accommodation? b) Whether the entire charge recovered from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as non- taxable supply in terms of referred notification. Hence, condition precedent of composite supply of being taxable supplies is not fulfilled. 3) The litany of the ancillary supply of services as prayed by applicant to be treated as ancillary supplies of composite supply not liable to be taxed is quiet exhaustive covering all the conceivable services like coaching, catering, library, entertainment, parking etc. By, no stretch of imagination, supply of these services can be treated as naturally bundled and supplied in conjunction to each other in the ordinary course of business. Basically composite supply means those supplies involving principal and ancillary supplies which cannot be supplied separately in ordinary course of business and supplies of one occurs in conjunction to other. 4) Thus doctrine of inseparability is key to composite supply. However, in impugned case all the services like catering, coaching, entertainment etc., which are sought to be treated as ancillary supply, can be independently supplied to the boarders in the Hostel by tax payers. Similarly, there is no obligation of coupling of service of accommodation in hostel with these services. In fact, mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple services, the issue has to be examined whether the aforesaid supply is a Composite Supply or a Mixed Supply. Concept of 'composite supply' under Section 2 (30) of GST Act, 2017 defines 'composite supply' as under: "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; In view of above, we find that essential components of a composite supply are as under- -two or more taxable supplies; -services should be naturally bundled; -supplied in ordinary course of business; - one of the supply out of whole should be a principal supply. We find that, the services supplied are more than two and taxable under GST Act, 2017 and are supplied in ordinary course of business by the applicant. * Bundling/ Naturally bundled has not been defined in GST law, hence, reference can be taken from CBEC Education Guide issued in 2012 after introduction of negative list in erstwhile Service Tax regime when concept of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 bundled naturally with principal supply. ❖ As the jurisdictional officer has commented, the ancillary services as mentioned above are not provided with accommodation in Kota and is not a common practice. Further, the perception of a service recipient cannot be declared sacrosanct in respect of above said ancillary services. Further, the services like GYM and TV in dining hall will not help in better enjoyment of the accommodation service for students. If this criteria, contested by the applicant is applied then everything under the sun is included as ancillary to accommodation service which will defeat the rationale behind concept of composite supply. ❖ Further, GST flyers has mentioned that-Other illustrative indicators, not determinative but indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts the highest rate of tax." We observe that the services supplied by the applicant such as hostel accommodation, food, gym, playroom etc. are provided for a single price of Rs. 17000/- per student and is not a Composite supply, therefore, the supply is a Mixed Supply under GST. The rate of GST on total supply will be that rate which is highest among the services provided by the applicant. * To ascertain rate of GST on Mixed Supply, we have to examine rate of GST on services provided by the applicant to determine the highest rate of tax applicable on whole supply - * The service of hostel accommodation, consideration for which is less than Rs. 1000/- per day is classifiable under HSN 996329 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and is exempted from GST by way of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, the relevant portion of the said annexure and notification is as below- ANNEXURE to 11/2017-CT (R) Dated 28.06.2017 Sl.No. Chapter, Section, Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 76 Group 99632 Other accommodation services 77 996321 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9721 Hairdressing and barbers services 710 999722 Cosmetic treatment (including cosmetic or plastic surgery), manicuring and pedicuring services 711 999723 Physical well-being services including health club and fitness centre 712 999729 Other beauty treatment services nowhere else classified Notification No. 11/2017-CT (R) Dated 28.06.2017 Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition (1) (2) (3) (4) (5) 35 Heading 9997 Other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified). 9 - ❖ The applicant is providing service of serving of food to students in hostel. The said service is classifiable under HSN 996333 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 5% (SGST 2.5% + CGST 2.5%) as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended). The relevant portion of the said annexure and notification is as below- ANNEXURE 11/2017-CT (R) Dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding any discount offered on the published charges for such unit. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]] ❖ The applicant is providing "playroom" services to students residing in hostel. The said service is a kind of sporting/recreational service classifiable under HSN 999652 as provided under Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18% (SGST 9% + CGST 9%) as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The relevant portion of the said annexure and notification is as below- ANNEXURE 11/2017-CT (R) Dated 28.06.2017 Sl. No. Chapter, Section, Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 687 Group 99965 Sports and recreational sports services 688 999651 Sports and recreational sports event promotion and organisation services 689 999652 Sports and recreational sports facility operation services 690 999659 Other sports and recreational sports services nowhere else classified Notification No. 11/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... else classified Notification No. 11/2017-CT (R) Dated 28.06.2017 Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 23 Heading 9985 (Support services) [(iii) Support services other than (i) and (ii) above 9 - In view of the above, we find that highest rate of GST is 18% amongst various services provided by the applicant to students in hostel. As the services supplied by the applicant is a Mixed Supply and will attract GST @ 18% (CGST 9% + SGST 9%). * The applicant has cited various case laws and references viz. M/s. Ernakulam Medical Centre Pvt. Ltd. vide Advance Ruling No. KER/ 16/2018, dated 19-9-2018 [2018 (18) G.S.T.L. 142 (A.A.R. - GST)], M/s All Rajasthan Corrugated Board and Box Manufacturers Association, reported at 2019 (7) TMI 847 - AAR, Rajasthan, contending that the services supplied by them is a composite supply is not tenable as the facts are quite different from the present application. Further, 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 sev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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