TMI Blog2020 (1) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bundled naturally with principal supply - the ancillary services like gym, housekeeping, play room, TV in dinning hall are not naturally bundled with principal supply of accommodation service and therefore as per definition of Composite Supply discussed above, the supply by the applicant is not a composite supply. Service of serving of food to students in hostel - HELD THAT:- 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% as defined under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended). Providing playroom services to stud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/ RGST Act, 2017, within a period of 30 days from the date of service of this order. At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the GST Act . The issue raised by M/s Kalani Infrastructure 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 registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, neither there is any choice with the student to opt for standalone hostel accommodation without opting for food facility nor there is any bifurcation of charges for food facility provided to the students. There is no dispute to the fact that the provision of hostel accommodation alongwith food facility falls under 'Supply' as defined under Section 9 of the CGST Act, 2017. Here the reference of CGST Act, 2017 may be treated as reference to State GST, UTGST and IGST Act also. The food facility is provided as an integral part and naturally bundled with the hostel accommodation and no separate amount is charged from the students. Since the provision of services comprises two or more components wherein the principal activity is of the rental services of 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reason-ably expect 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 facility. It is submitted that need for food facility cannot arise unless there is need of hostel accommodation. The applicant does not provide food to the student on independent basis. Accordingly, as per interpretation of the applicant, the provision of hostel accommodation along with food should be treated as 'composite supply' and applicability of GST would be determined as per 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. Having mentioned above that hostel accommodation along with food facility would be treated as composite supply, it is relevant to determine the taxability on such composite supply. Kind attention is invited to Sr. No. 14 of the CGST (Rate) Notification No. 12/2017 dated 28.06.2017 as amended which provides that services of rental accommodation having value of supply up to ₹ 1000/- per day would be exempted from GST. In the current case, since the rent charged for residential accommodation in hostel from the student along with food facility is ₹ 17,000/- for full month the per day charges does not exceed ₹ 1000/-, the entire activity of hostel accommodation along with 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 ₹ 1000/- is exempt from GST. In view of the above fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of said supply is below or equal to one thousand rupees. The contentions of applicants are both legally and factually incorrect on following grounds. 1) The composite supply is defined under section 2(30) of RGST Act as under: Composite supply' means a supply made by taxable person to a recipient consisting of two or more taxable supplies of goods and services or both, or any combinations thereof which are naturally bundled or supplied in conjunction to each other in the ordinary course of business, one of which is principal supply. 2) Thus, there are two essential components of composite supply: First, both principal and ancillary supplies should be taxable supplies and secondly principal and ancillary supplies should be naturally bundled and supplied in conjunction to each other in the ordinary course of business. The applicant by own admission declares principal supply that is accommodation in the Hostel 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 ancill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the facts of application and contention of the applicant, we need to refer to concept of supply, composite supply, mixed supply, concept of naturally bundled, principal supply and various notifications and circulars incidental to these concepts. First, the provision of hostel accommodation alongwith ancillary facilities falls under 'Supply' as defined under Section 7 of the GST Act, 2017 which is as under- (1) For the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; As the applicant is supplying accommodation services along with some ancillary services for a consideration of ₹ 17000/- per month in course of business, the activity falls under the definition of supply. Further, as the supply involves multiple 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether services are bundled in the ordinary course of business or not 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 many indicators some of which are listed below - i. The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reason-ably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. ii. Majority of service providers in a particular area of business pro-vide similar bundle of services, iii. 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. We find 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 ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the supply by the applicant is not a composite supply. As the above said supply is not a Composite Supply, the facts of the case can be examined in respect of Mixed Supply. Mixed Supply has been defined in Section 2(74) of GST Act, 2017 as below- (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; Further, tax liability on a mixed supply shall be determined as defined in Section 8 (b) of GST Act, 2017 which is as below- a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. We observe that the services supplied by the applicant such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent. Nil Nil As applicant is charging ₹ 17000/- for a month (assuming it to 30 days in a month), the per day charges is below ₹ 1000, therefore the said service is exempted from GST. The same is also clarified vide CBIC Circular No. 32/06/2018-GST dated 12thFebruary, 2018. The relevant portion is as below- Sl.No. Issue Clarification 1 Is hostel accommodation provided by Trusts to students covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate). Hostel accommodation services do not fall within the ambit of charitable activities as defined in para 2(r) of notification No. 12/2017-CT(Rate). However, services 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 are exempt. Thus, accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el. 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 28.06.2017 Sl. No. Chapter, Section, Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 80 Group 99633 Food, edible preparations, alcoholic and non-alcoholic beverages serving services 81 996331 Services provided by restaurants, cafes and similar eating facilities including takeaway services, room services and door delivery of food 82 996332 Services provided by Hotels, Inn, Guest House, Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared tariff' includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), (iii), [(iiia),] (iv) and (v) above. 9 - ❖ The applicant is also providing housekeeping and room cleaning services to students residing in hostel. The said service is classifiable under HSN 998533 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 Service Code (Tariff) Description (1) (2) (3) (4) 400 Heading 9985 Support services 420 Group 99853 Cleaning services 421 998531 Disinfecting and exterminating service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y examined in the backdrop of several factors some of which are outlined above. We also observe that, Hon'ble West Bengal Authority for Advance Ruling under GST in the matter of M/s Sarj Educational Centre, has issued an Advance Ruling No. 42/WBAAR/2018-19 dated 26.02.2019 on the similar issue viz. whether lodging along with food to the students by a private boarding house is a composite supply and eligible for exemption under Sl. No. 14 of Notification No. 12/2017-CT(Rate) dated 28.06.2017. The Authority for Advance Ruling held as under: 4.5. The bundle of services offered to the recipients, therefore, consists of both taxable and non-taxable supplies. It is also evident that although the services are offered in a bundle, they are not indivisible, and different considerations are paid for different packages of such services offered to the recipients, depending upon their requirement for lodging facility. For example, laundry service is not offered to the day boarders. These are not, therefore, bundles of taxable supplies that are inseparable and supplied only in conjunction with one another in ordinary course of business. The services the Applicant supplies are n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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