Hostel charging rent of less than Rs. 1000 per day per Student is not taxable under GST

Fact and Issue of the case

M/s. Ghodawat Eduserve LLP, the applicant situated at Gat No. 584, Kolhapur Sangli Highway, Atigre, Kolhapur is registered under the CGST Act, 2017 having GSTIN 27AANFG4895L1ZJ and provides commercial training and coaching service for students appearing for 11th and 12 th standards who are desirous of appearing for I IT, etc., secifically in science stream. Applicant is also providing hostel facility to the students on demand basis and charging them additionally. The service of hostel is optional and not coming in the form of package. The hostel provides basic residential facilities, required to stay and study which include well-maintained furnished residence, Light, water, etc. and in consideration, hostel is charges a nominal lump-sum fee of Rs. 34,000/- per year per student i.e. Rs. 95/- (Approx.) per day. The hostel is also available for the students learning in the schools nearby.

Under GST exemptions for services are notified vide Notification No. 12/2017- Central Tax (Rate), as amended time to time. In the said notification in Serial Number 12 exemption is provided for “Services by way of renting of residential dwelling for use as residence”. However ‘Residential Dwelling’ is not defined in the Act and in exemption notification as well. Therefore, the meaning of expression ‘residential dwelling’ has to be understood in terms of the normal trade parlance. It means any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay. In a Foreign Judgment, namely, in Collins (AP) V. Uratemp Ventures Limited [2012] 24 taxmann.com 134 (ECJ). it was held that –

‘Dwelling’ means a place where one lives, regarding and treating it as home. It is the place where he lives and to which he returns for sleep and which forms the Centre of his existence. Dwelling may be a house or part of a house and even a single room as a part of a house, may be a dwelling. However, the use a person makes of it when living there depends on his mode of life. Such a place does not cease to be a ‘dwelling’ merely because one takes all or some of one’s meals out; or brings take-away food in to the exclusion of home cooking: or at times prepares some food for consumption on heating devices.

For example, rooms in colleges at the universities in which unmarried fellows live are dwelling house even if the fellows do not prepare their own meals or cook in their rooms. Such rooms may lack cooking facilities and, even, running water and the fellows eat in hall or bring meals from college kitchens, but, such rooms continue to be dwelling house. A bed-sitting room which a tenet occupies as his home may be a dwelling. A room can be regarded as “home” and, consequently, a dwelling house even if there is no bed therein, as the person may sleep in an armchair, or in blankets on the floor.

Observation of the Authority

The authority has observed the records on file and gone through the facts of the case and submissions made by both, the applicant as well as the department. The subject matter is related to interpretation of the Notification entry and the whether the subject activity carried out is exempt or not. Applicant is providing commercial training and coaching service to students appearing for 11th and 12th standards desirous of appearing for ITT, etc. Applicant provides hostel facility to such students on demand basis and charges them additionally. The service of hostel is optional and is not in the form of a package.

The hostel provides residential facilities which include, well-maintained furnished residence, Light, water, etc. and in consideration, the hostel is charging a nominal lump-sum fee of Rs. 34,000/- per year per student, which comes to Rs.95/ /Approximately) per day. The hostel is also available for the students of the nearby schools. Applicant has submitted that the exemption is available for their services under Sr. No. 12 ofNotification No. 12/2017- Central Tax (Rate), as amended from time to time, wherein, exemption is provided for “Services by way of renting of residential dwelling for use as residence”. The term, ‘Residential Dwelling’ is neither defined in the Act nor defined in the exemption notification. Therefore, the meaning of expression ‘residential dwelling’ has to be understood in terms of the normal trade parlance. In normal trade parlance, ‘residential dwelling’ means, any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay.

Further, as per the applicant, Exemption is available under Sr. No. 14 of Notification No. 12/2017- Central Tax (Rate) (hereinafter referred to, as the said notification) as amended, 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 one thousand rupees per day or equivalent.

It is, therefore, necessary to examine the relevant entries at the Sr.No. 12 and Sr No. 14 of the said Notification dated 28.6.2017 to understand as to how the said entries will be applicable to the impugned activity undertaken by the applicant. The relevant parts of the Said Notification are reproduced as under:-

Sr. No	Chapter, Section, Heading, Group of Service code (Tariff)	Description of Services	Rate %	Condition
1	Chapter 99
12	Heading 9963 or Heading 9972	Services by way of renting of residential dwelling for use as residence.	Nil	Nil
14	Heading 9963	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.	Nil	Nil

As per the applicant, hostel accommodation provided to the students is covered within the meaning of ‘residential dwelling’ and is exempted under SI. No. 12 of the said notification. We find that the Entry at Sr. No. 12 is related to services by way of renting of ‘residential dwelling for use as residence’. It is observed that the term “residential dwelling” is not defined under the GST Act. But in common parlance it is to be called as “A house or an apartment or other places of residence or a place to live in or building or other places to live in.’

The jurisdictional officer has contented that, “Residential Dwelling’ means a house given on rent to a person or a family, consisting of Kitchen, Bathroom, Toilet, Rooms and other amenities required for day-to-day living purpose under agreement. Similarly, Hostel is also not defined anywhere in the law, but, hostel and hostel rooms means a building owned by a private or Educational Institution built in a such way that one room may be acquired by one or two students who are attached to the educational institute.

To decide the present issue, we also make reference to the clarification issued by the Tax Research Unit vide circular No. 32/06/2018-GST dated 12th February 2018, the relevant part of which is reproduced as under-

Sr. No.	Issue Clarification	Clarification
1.	Is hostel accommodation provided by Trusts to students covered within the definition of Charitable Activities and thus, exempt under SI. No. 1 of Notification No. 12/2017- Central Tax (Rate)	Hostel accommodation services do not fall within the ambit of charitable activities as defined in para 2(r) of Notification No. 12/2017- Central Tax (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, accommodation service in hostels including by Trusts having declared tariff below one thousand rupees per day is exempt. [SI. No. 14 of Notification No. 12/2017- Central Tax (Rate) refers]

In view of the above mentioned clarification, we are of the opinion that, the hostel accommodation provided by applicant to students is not covered by exemption Notification Entry No. 12 of Notification No. 12/2017- Central Tax (Rate). Further, we may refer to entry Sr. No. 14 of the said Notification No. 12/2017- Central Tax (Rate) to ascertain the treatment in respect of use of hostel rooms given for residential purposes. The relevant portion of Sr. No. 14 of Notification No. 12/2017- Central Tax (Rate) is as under:-

Sr. No.	Chapter, Section, Heading, Group or Service Code (Tariff) Description	Description of	Rate (per cent.)	Services Condition
(1)	(2)		(4)	(5)
14	Heading 9963	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.	Nil	Nil

From the scrutiny of above exemption entry no. 14, we find that the description of service is user based, meaning that, if the accommodation is used for residential or lodging purpose then it is immaterial who the user is. The said entry mentions “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 ‘Whatever name called’. The services provided by such hostel, for residential and lodging purposes would be covered by the scope of notification entry where the declared tariff of a unit of an accommodation is below one thousand rupees per day. Therefore, the scope of the entry is restricted to use of the accommodation unit for residential and lodging purpose only.

It is pertinent to mention at this juncture that, the applicant in both the oral and written submissions has stated that the hostel stay for the students is optional. Further, the applicant has also mentioned that the stay in hostel being optional to the students, the hostel fees are not included in the training/coaching fees collected from the students. In fact the hostel fees are not a part of any package concerning commercial training and coaching services rendered by the applicant. The decision is being made in this order taking into consideration the said submissions made by the applicant.

Conclusion

For reasons as discussed in the body of the order, the questions are answered as under: –

Question 1. Whether the activity of providing the hostel on the rent to various students by applicant is exempt (where hostel fees charged per student per day is much less than Rs. 1000/-)?

Answer: – Answered in the affirmative.

Question 2. If is it exempt it shall be claimed as exempted under Serial Number 12 or Serial Number 14 of Notification No. 12/2017- Central Tax (Rate) (as amended time to time) dated 25/06/2017

Answer:- The present activity of the applicant is exempted under Serial Number 14 of Notification No. 12/2017- Central Tax (Rate) as amended from time to time.

Read the full order from below

Hostel-charging-rent-of-less-than-Rs.-1000-per-day-per-Student-is-not-taxable-under-GST

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