Hostel accommodation services exempted from GST from August 2021 till July 18, 2022

The AAR, Uttar Pradesh, in the matter of V S Institute & Hostel Private Limited [Advance Ruling No. UP ADRG 26/2023 dated May 08, 2023] ruled that hostel accommodation charging less than INR 1,000 per day from August 2021 till July 18, 2022 is exempt from GST. However, from July 19, 2022 and onward the exemption longer applies, and the applicable GST rate is 12%.

Facts

M/s. V S Institute & Hostel Private Limited ("the Applicant") is providing hostel services to the students of educational institutions on annual basis.

The Applicant rented out their building to Sharda University situated at Knowledge Park- III, Greater Noida, U.P for the period November, 2018 to July, 2021, vide agreement dated July 16, 2018.

Further, the Applicant provided residential facilities including food, electricity, Wi-Fi, water etc. as inclusive services, and receives rent INR 1000 per day per person to students of various educational institutes.

The Applicant submitted that the hostel facility during the period August 01, 2021 till the date of seeking advance ruling and will undertake the same in future. 

Since, the rendition of service by way of renting of hostel rooms is less than INR 1,000 per day and thus the said services are covered under S. no. 12 and 14 of the Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 ("the Service Exemption Notification") whichexempts the supply of hostel rooms for residential purposes to the students where charges are lesser than INR 1000 per day per person.

The Applicant relied upon the case of theHon’ble Karnataka High Court inTaghar Vasudeva Ambrish v. Appellate Authority of Advance Ruling [W.P. No. 14891 of 2020 dated February 07, 2022]wherein the court held that "leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No. 09/2017 dated September 28, 2017 namely ‘Services by way of renting of residential dwelling for use as residence and  the petitioner is held entitled to benefit of exemption notification.

The Applicant filed an application before the AAR, Uttar Pradesh to seek whether the accommodation provided by the Applicant would be exempt or not.

Issue

Whether hostel accommodation provided by the Applicant to the students for residential purposes where charges are less than INR 1,000 per day during the period August 01, 2021 till July 12, 2022 is exempt from GST?

Held

• Observed that, the nature of service has not changed from August 01, 2021 only the provider of services has changed because the map has been sanctioned by the Greater Noida Industrial Development Authority of Uttar Pradesh established in January 1991 under the UP Industrial Area Development Act 1976 for the residential as well as for commercial use and the Applicant has started to provide the hostel service directly to the students of educational institutions like GL Bajaj, Daron Acharya, GNIT, Sharda University, Amity University and several others from August 01, 2021 without charging GST, as students are residing for a fixed term on annual basis. 
• Further observed that, the word hostel is not defined in GST. If the Government had intended to exclude hostel services, then it would have been excluded the same from the service exemption notification. As the word ‘Hostel’ is neither a new word oruncommon word, thus it can be simply concluded that also the hostel accommodation services provided by Applicant falls under SAC Code 996322 as mentioned under the service exemption notification.
• Noted that, through Notification No. 03/2022 Central Tax (Rate) dated July 13, 2022 w.e.f. July 18, 2022 amended Notification No. 11/2017 Central Tax (Rate) S. No. 7, by omitting the word ‘above one thousand rupees but’ making accommodation taxable @12% in case where unit accommodation per day is less than INR 1000.
• Held that, the hostel accommodation services provided by the Applicant to the student for the period August 2021 till July 18, 2022 was exempt from GST. However, after July 19, 2022 the same was taxable @ 12% in case where charges were less than INR 1000 per day.