In Advance Ruling No. UP ADRG- 26/2023 -AAR- Hostel accommodation provided by V.S. Institute & Hostel Private Limited, charging less than Rs. 1,000 per day, exempted from GST Liability until 17.07.2022: AAR (Uttar Pradesh)
Members Rajendra Kumar (Central Tax) & Harilal Prajapati (State Tax) [08-05-2023]

Read Order: In Re: M/s V.S. Institute & Hostel Private Limited

Chahat Varma

New Delhi, July 28, 2023: The Uttar Pradesh bench of the Authority for Advance Rulings has ruled that the hostel accommodation provided by M/s. V. S. Institute & Hostel Private Limited (applicant), to students for residential purposes, charging less than Rs. 1,000 per day, was exempt from GST liability under Sl. No. 12 and 14 of the Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017, until 17.07.2022.

The applicant provided hostel services to students of educational institutions for a fixed term on an annual basis. They sought an advance ruling to determine whether the hostel accommodation provided to students for residential purposes, charging less than Rs. 1,000 per day, during the period from 01.08.2021 was exempt from GST liability under Sl. No. 12 and 14 of the Exemption Notification. Additionally, they sought clarification on whether hostel accommodation provided to students for residential purposes, charging less than Rs. 1,000 per day, during the period from 13.07.2022 till the present date, and similar transactions to be undertaken in the future, were exempt from GST liability under Sl. No. 12 of the Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017, as amended vide Notification No. 04/2022-CT (Rate) dated 13.07.2022.

The two-member bench of Rajendra Kumar (Central Tax) and Harilal Prajapati (State Tax) observed that hostels were mainly maintained for commercial benefit and were similar to hotels, thus making them subject to GST on hostel charges. Additionally, the hostel operators often lease properties from landlords and rent them out to students and working professionals, further establishing their commercial nature.

After analysing Entry No. 14 of Notification No. 12/2017-CT(Rate) dated 28.06.2017 and the CBIC's Circular No. 32/06/2018-GS dated 12th February 2018, the bench held that the description of service was user-based. This means that if the accommodation was used for residential or lodging purposes, it did not matter who the user was. The entry in question mentioned ‘Services by a hotel, inn, guest house, club, or campsite, by whatever name called, for residential or lodging purposes’. Since the word ‘hostel’ was not specifically mentioned, the bench inferred that hostels would be covered under the term ‘whatever name called’.

The bench further held that from 18.07.2022 onwards, the services provided by the applicant, will be covered under the relevant entry of Notification No. 11/2017-Central Tax (Rate) and such services will be taxable at a rate of 12%, if the unit accommodation per day was less than Rs. 1,000.