The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s. Ghodawat Eduserve LLP has while differentiating between residential dwelling and hostel has ruled that Hostel Rent of less than Rs. 1000 per day per student is exempted from GST.
Facts of the case:
The applicant, M/s. Ghodawat Eduserve LLP is providing commercial training and coaching service for students appearing for 11th and 12th standards who are desirous of appearing for IIT, etc., specifically in the science stream. It is also providing hostel facilities to the student’s on-demand basis and charging them additionally.
The service of the hostel is optional and does not come in the form of a package. The hostel provides basic residential facilities, required to stay and study which include well-maintained furnished residence, Light, water, etc., and in consideration, the hostel 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.
Issue on which ruling was sought:
The applicant has sought the advance ruling on the issue of whether the activity of providing the hostel on rent to various students by the applicant is exempt (where hostel fees charged per student per day is much less than Rs. 1000/-); and if is it exempt it shall be claimed as exempt under Serial Number 12 or Serial Number 14 of Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 (as amended time to time).
Order of AAR: Deliberations and Ruling
AAR observed that hostel room which is usually allotted on sharing basis to 3 students is for a period which is usually more than 3 months. The rooms in hostel are let out to the students for residential and study purposes only, that too during the training and coaching periods. There are basic differences between a residential dwelling and a Hostel. The subject activity of the applicant is not covered under ‘Residential Dwelling’ and hence, the relevant Sl. No 12 of the Notification No. 12/2017-CT dated 28th June, 2017 (as amended) is not applicable in the present case.
AAR noted that from scrutiny of sl No 14, the description of service is user-based, meaning that, if the accommodation is used for residential or lodging purposes 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 or lodging purposes would be covered by the scope of notification entry where the declared tariff of the unit of an accommodation is below Rs 1000/- per day
In view of the above deliberations, the Coram of members Rajiv Magoo and T.R.Ramnani ruled that hostel fee charged is not exempted under Sl. No 12 and is rather exempted under Sr. No. 14 of the Notification No. 12/2017-CT dated 28th June, 2017 (as amended) for services provided by a hostel for residential or lodging purposes, having a value of supply of a unit of accommodation (hostel fee charged per student per day) below Rs.1000/- per day.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
