Case Details:

Ghodawat Eduserve LLP

Appeal No.:

GST-ARA-72/2019-20/B-51

Ruling pronounced by:

GST AAR Maharashtra

Date of Ruling:

27-08-2021

The applicant is providing commercial training and coaching service for students appearing for 11^th and 12^th standards who are desirous for IIT etc. The applicant is also providing optional hostel facility to the students on demand basis. The hostel facility includes furnished residence, light, water etc. for a lump-charge of Rs. 34,000 per year per student (Rs. 95 per day).

The applicant submitted that Serial No. 12 of Notification No. 12/2017- Central Tax (Rate) dated 28/06/2017 provides for exemption for “Services by way of renting of residential dwelling for use as residence”. The nature of residential accommodation expected under Sr. No. 12 is long term accommodation other than stay in lodging, hotels etc. which are meant for temporary or short-term accommodation. Therefore, stay in hostel is covered by Sr. 12 of aforesaid Notification and hence not liable for GST.

Under Sr. No. 14 of the above Notification, exemption is available for services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below Rs. 1000 per day.

The activity of the applicant falls under renting for residential purpose which is indicated by the express clarification issued by CBIC in Education Guide on Service Tax dated 20-06-2012 at para 4.13.3 which is reproduced as below:

Ques: Furnished flats given on rent for such renting as residential dwelling for the temporary stay (a few days)

Clarification: Such renting as residential dwelling for the temporary stay (a few days) for bonafide use of a person or his family for a reasonable period shall be residential use; but if the same is given for a short stay for different persons over a period of time, the same would be liable to tax.

Hence, from the combined reading of the above exemptions/ relaxation and various references under Finance Act 1994 it seems that Sr. No. 12 of Notification No. 12/2017- Central Tax (Rate) is applicable for the renting of immovable property in the instant case.

The applicant also made reference to the following judicial precedents:

• GST AAR West Bengal in the case of Borbheta Estate Pvt. Ltd. (13/WBAAR/2019-20)
• GST AAR Chattisgarh in case of Kamal Kishor Asarwal Ramnath Bhimsen Charitable Trust (STC/AAR/11/2018 dated 2^nd March, 2019
• GST AAR Maharashtra in case of Students Welfare Association (GST-ARA-55/2018-19/B-170 dated 9^th Dec. 2018)

The applicant stated that the CBIC has considered both hostel and hotel are one and the same and accordingly concluded that the exemption under Sr. No. 14 of Notification No. 12/2017- C.T. (Rate) dated 28.06.2017 is also available to hostels vide Circular No. 32/06/2018-GST dated 12^th February 2018.

The persons occupying the hostel accommodation are primarily students of the institute and not the tenants as in case of rent agreements. Privileges and rights of tenancy are not available to students. In hostel rooms, only students can stay and not their families as in case of residential dwelling. Once a person ceases to be the student, he has to vacate the hostel room and cannot renew his stay even on payment. So, the exemption available to renting of renting of residential premises for residence cannot be made available to hostel accommodation and the hostel service provided by the taxpayer is taxable under the provisions of CGST Act.

The Appellate Authority of Advance Ruling (AAAR) in its judgement reported in 2019 (24) GSTL 496 (AAT-GST) and 2019(24) GSTL 109 (AAR-GST) has decided similar cases, where the party was trying to classify the hostel room in the activities of charitable trust, and held that supply of hostel services for a nominal lump-sum amount of Rs. 6,000 to Rs. 7000 per month along with ancillary services such as food and parking without any additional costs is not covered under the definition of charitable activities in terms of para 2(r) of the Notification No. 12/2017 – CT (Rate) as per CBIC Circular No. 32/06/2018-GST dated 12.02.2018. These case laws are squarely applicable in the present case. Therefore, the benefit of Notification No. 12/2017 – CT (Rate) is not available to the taxpayer.

The hostels are exclusively meant for temporary residence for students during the time period of training and coaching only. The applicant is also providing hostel facility to the students who are not their own institutional students i.e. to the students of the school nearby. The students are staying on a temporary basis and they have not made any type of kitchen in their rooms. Food facility is provided from the mess, to the students by the applicant. No permission is granted by the applicant to allow any guests to stay along with the students. Considering the scenario and the facts of the case, we don’t find that the criteria for residential dwelling under the common parlance test are satisfied.

In the present case, the hostel room is allotted to students on sharing basis and that too during the training and coaching periods. These are the basis differences between a residential dwelling and a Hostel. Hence, applicant’s contention that the subject activity is covered under Entry No. 12 of the said Notification is not acceptable. Therefore, the subject activity of the applicant is not covered under “Residential Dwelling” and hence, the relevant entry no. 12 of the said notification is not applicable.

The Authority made reference to ruling of Maharashtra AAR in case of M/s Student Welfare Association, Pune having similar facts, in which it was held that provision of residential facility in hostel on rental basis to the students is exempted under Entry No. 14 of Notification No. 12/2017 mentioned above, if the amount recovered from the students is below Rs. 1000 per student per day.

The Authority also referred clarification issued by CBIC vide Circular No. 32/06/2018- GST dated 12^th February 2018 as below:

Ques: Is hostel accommodation provided by trusts to students covered within the definition of charitable activities and thus, exempt under Sr. No. 1 of Notification No. 12/2017- CT (Rate)

Clarification: 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 Rs. 1000 per day are exempt. Thus, accommodation service in hostels including by trusts for Rs. 1000 per day is exempt. [Sr. No. 14 of Notification No. 12/2017]

From the analysis of above exemption entry no. 14, we find that the said entry mentioned “Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes”. The word ‘hostel’ not being specifically mentioned implies that the same would be covered under the term ‘by whatever name called’. The services provided by such hostel for residential and lodging purposes would be covered by the scope of the notification entry where the declared tariff of a unit of an accommodation is less than Rs. 1000 per day.

Question

Ruling

Whether the activity of providing the hostel on the rent to various students by the applicant is exempt if hostel rent per student per day is less than Rs. 1,000

Considering the provisions of the Notification Entry No. 14 and clarification given by CBIC in circular no. 32/06/2018- GST dated 12^th February 2018, it is held that the applicant’s activity is satisfying the conditions of Entry Sr. No. 14 of the said notification and hence, would be exempt from taxes.

Whether exemption for hostel accommodation will be available under Sr. No. 12 or Sr. No. 14 of Notification No. 12/2017- Central Tax (Rate)

The activity of the applicant is exempted under Sr. No. 14 of Notification No. 12/2017 – C.T. (Rate) dated 28.06.2017.