Gurkripa Career Education Private Limited ., In re

At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.

The issue raised by M/s Gurkripa Career Education Private Limited, Plot No. 60, Jyoti Nagar, Samrathpura, Piprali Road, Sikar-332001, Rajasthan (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b)& (e) given as under: –

(b)Applicability of a notification issued under the provisions of this act;

(e) Determination of liability to pay tax on any services;

Further, the applicant being a registered person I GST1N is 08AAHCG0218N1Z1 as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings, were passed by any authority. Based on the above observations, the applicant i. admitted to pronounce advance ruling.

SUBMISSION OF THE APPLICANT: (in brief)

APPLICANT’S INTERPRETATION

Legal Provisions and Interpretation in light of Facts of the Case

(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

Illustration – Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;

Illustration – A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely—

(a) a composite supply comprising Iwo or more supplies, one of which is a principal supply, shall he treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

when two or more taxable supplies either of goods or services or both occurs, it may be treated as mixed or composite supply.

When two or more supplies occurs against a rate of tax, then it is termed as’ mixed supply’.

1. Two or more taxable supplies of goods or services or both, or any combination thereof,

2. Supplies are naturally bundled,

3. Supplied in conjunction with each other in the ordinary course of business,

4. One of which is a PRINCIPAL SUPPLY

Meaning of Hostel

As per Merriam Webster, Hostel means “an inexpensive lodging facility for usually young travelers that typically has dormitory-style sleeping arrangements and sometimes offers meals and planned activities.”

As per Cambridge Dictionary Hostel means “a large house where people can stay free or cheaply or a place where people, especially young people, can stay cheaply for short periods when they are traveling, with shared rooms and sometimes some private rooms

As per Collins Dictionary “A hostel is a large house where people can stay cheaply for a short period of time. Hostels are usually owned by local government authorities or charities.”

As per Oxford Learner Hostel is “a building that provides meals and a cheap place to stay to students, workers, or travelers”

In Common Parlance: A hostel is an establishment which provide inexpensive food and lodging tbr a sp^ecific g^roup of people, suc students, workers, or travellers. The word 1-lostel can also be used as synonyms of Cheap Hostel, Youth Hostel, bed and breakfast, boarding house, guest house etc.

Form the above definitions it can be perceived that the hostel is meant for residential and lodging purpose or can also be interpreted as guest house, inn for the purpose of staying with amnesties.

Meaning of Hotel

As per Oxford Learners Hotel means “a building where people stay, usually for a short time, paying for their rooms and meals.”

As per Cambridge dictionary Hotel means “a building where you pay to have a room to sleep in, and where you can sometimes eat meals.” Meaning of Club

As per Oxford Learners Club means “an organization for people who share an interest or do a sport or activity together.”

As per Cambridge dictionary Club means “an organization of people with a common purpose or interest, who meet regularly and take part in shared activities”

Meaning of Guest House

As per Oxford Learners Guest House means “a small hotel”

As per Cambridge dictionary Guest House means “a small house near a larger one, where guests who are invited to the larger house can stay”

Meaning of INN

As per Wikipedia “INNs are generally establishments or buildings where travelers can seek lodging, and usually, food and drink.” In general parlance, INNs are an inexpensive lodging facility for usually has dormitory-style sleeping arrangements and planned activities.

Question I. 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/-)?

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 28.06.2017.

Relevant extract of the ruling is reproduced hereunder for the reference:

“5.14 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.

5.1 5 The contention of Jurisdictional Officer, stating that the subject activity is taxable is not acceptable. The applicant is providing hostel on the rent to various students where fees charged per student per day per room is much less than Rs. 1000/- per day per person. Therefore, considering the provisions of Notification Entry No. 14, and clarification given by CBIC in circular No, 32/06/2018-GST, dated 12-02-2018, it is held that, the applicant’s activity is satisfying the conditions of Entry Sr.no. 14 of said Notification and hence would be exempt from taxes.

5.16 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 o’ 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.

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 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 28.06.2017.

Answer: – The present activity of the applicant is exempted under Serial Number 14 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 (as amended time to time).

(a) GST AAR Chhattisgarh in case of Kamal Kishore Agarwal Ramnath Bhimsen Charitable Trust (Order No STC/AARJ11/2018 dated 2nd March 2019)

In this Advance Ruling authority pronounced that:

“The activity of providing accommodation services by the applicant in their hostel for which the applicant is collecting an amount below the threshold limit of Rs. 1000/- per day and no other charges are being collected for providing other allied facilities / services therein viz, canteen food, parking space for vehicles, coaching, library, entertainment etc. merits exemption as stipulated under Notification No. 12/2017-State Tax (Rate) No. F-10-43120t7/CT/V(80), Naya Raipur, Dated 28.06.2017 under Serial No. 14, Chapter 9963. This amount received for such supply by the applicant falling under tariff heading 9963 qualifies being treated as nil rate tax exempted supply.”

(b) GST AAR Maharashtra in case of Students Welfare Association (Order No GST-ARA-55/2018-19/13- 170 dated 29.12.2018)

“Wherein AAR responded affirmatively to following question raised by Applicant. –

Whether the supply of residential or lodging [email protected],250/- per annum covered by Sr. No.14 of Notification No 12/2017 – CT(Rate)”.

Relevant extract of the ruling is reproduced hereunder:

“Question-2 Whether different treatment would be required for use of hostel rooms given by us for residential purposes but ultimately been used by the hirer for commercial use.

Answer: The clarification issued vide circular No, 32/06/2018-GST, dated 12-02-2018, we find that the distinction between services by a hotel, inn guest house club or composite, by whatever name called, for residential or lodging purposes and Hostel accommodation service is done away. In the present case applicant submits that during the vacation period hostel is offered for residential purpose and hired for labourers of a commercial organization.

We may now refer to entry Sr. No. 14 of the Notification no. 12/2017 to ascertain whether Offerent treatment would be required for use of hostel rooms given for residential purposes and commercial purposes.

From the scrutiny of above exemption entry, we find that the description of service is use based, meaning that if the accommodation is used for residential or lodging purpose then it is immaterial who the user is. 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.”

The applicant in said ruling was providing following services along with lodging service in hostel

The above facilities were part and parcel of the services provided for which single price was charged from the service recipients.

The advance Ruling authority pronounced its ruling in respect of the facilities included in the package of services with lodging service as under:

“7.6 The issue to be seen is what is the proposed tariff of the applicant. The details provided by the applicant shows that he is providing in addition to accommodation services, other facilities and charging a consolidated amount, including for all the mentioned facilities. The monthly rent charged is Rs. 12,500-00 at maximum and the daily tariff would amount to Rs.416-00, which is less than Rs. 1000-00 per day. Further, even when given on daily basis, it is seen that the maximum amount charged is Rs.500-00 per day which is below Rs. 1000-00 per day. Hence the tariff amount per unit of accommodation is less than Rs. 1000-00 per day. Hence the services provided is where the tariff is below Rs. 1,000-00 per day or equivalent.

7.7 Further, the Entry No. 14 of Notification No. 12/2017-Central Tax (Rate) Is analysed and it says all services of SAC 9963 provided by such a supplier having a declared tariff of less than Rs. 1000-00 per day or equivalent would be exempt. Further since in this supply, all the supplies are made as a package with the accommodation service being the principal supply, the entire supply would be treated as a composite supply of accommodation service as per Section 8 of the CGST Act, 2017. Hence, the proposed supply of services in question by the applicant would not be liable to tax as per Entry No. 14 of the Notification No. 12/2017-Central Tax (Rate) as amended from time to time. “

B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT

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

B. If it is exempt, under which entry of Notification No.12/2017-Central Tax (Rate) (as amended time to time) dated 28.06.2017, it is covered?

C. PERSONAL HEARING

In the matter personal hearing was granted to the applicant on 29.03.2022 at NCRB, Statue Circle, Jaipur. Miss Shuchi Sethi, CA (Authorised Representatives) of applicant appeared for PH. During the PH, they reiterated the submissions already made in the application. She submitted additional submissions dated 12.04.2022 to take on record in the matter.

D. COMMENTS OF THE JURISDICTIONAL OFFICER

The jurisdictional officer (Dy. commissioner, State Tax, Circle-B, Sikar, Rajasthan) has submitted his comments vide letter dated 11.01.2021 which can be summarized as under:

E. FINDINGS, ANALYSIS & CONCLUSION:

1. We have perused the records on file and gone through the facts of the case and the submissions made by the applicant as well as the On the basis of submission made, we arc of the view that the applicant i.e Gurkripa Career Education Private Limited tusTIN ORA AI ICG02 I 8N I ZI) is engaged in imparting commercial coaching service in the field of science stream to the students inspiring to clear medical and engineering entrance examinations like NEEL JEF. etc. and intends to provide hostel facility not only to the students who arc enrolled with the applicant for coaching service but also to the students of nearby schools/educational institutions.

2. Based on the submission made by the jurisdictional officer, we observe that Applicant is running hostel in the name of ‘M/s Gurkripa Career Education Hostel’ for residential A separate consideration is charged for providing such hostel facility to the students and hostel fees are not part of package of commercial coaching service.

3. The applicant in their written submission stated that they wishe to charge a consolidated amount of Rs. 1,02,000/- per year i.e., Rs. 279/- (Approx.) per day per student against provision of hostel residential facilities which include well-maintained residence, Light, water, etc.

4. Further, the applicant in their written submission stated that Exemption is available for their services under Sr. No. 14 of Notification No. 12/2017-Central Tax (Rate) 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.

5. In compliance with the information/ document asked by the Authority, the applicant vide additional submission dated 12.04.2022 stated that:

– they have no rent agreement of Hostel as location and premises has not been finalized.

-As no location is final therefore, there is no License obtained from the Local Authority.

-since the entity has not reached in operational stage yet, no material like brochure has been prepared by the applicant till date.

-Hostel facilities depending upon the choice of student which will include Single Occupancy, Double Occupancy and Triple Occupancy.

6. The question before the authority is that whether activity of providing the hostel facility on the rent to various students by applicant is exempt (where hostel fees charged per student per day is much less than Rs.1000/-) under Notification No.12/2017-Central fax (Rate) (as amended time to time) dated 28.06.2017 or otherwise.

7. Before we delve deep to decide the case, it would be proper in the fitment of justice to discuss the relevant provisions of the statute which are as under-

7.1 First, the provision of hostel accommodation alongwith ancillary facilities falls under ‘Supply’ as defined under Section 7 of the GST Act, 2017 which is as under-

(1) For the purposes of this Act, the expression “supply” includes— (a) all forms of supply of goods or services or both such as sale. transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

As the applicant is supplying accommodation services along with some ancillary services like Light, water, food etc for a consideration of Rs. 1,02,000/- per year i.e., Rs. 279/- (Approx.) per day per student in course of business, the activity falls under the definition of supply.

7.2 Concept of ‘composite supply’ under Section 2(30) of GST Act, 2017 defines ‘composite supply’ as under:

“composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

In view of above, we find that essential components of a composite supply are as under-

– two or more taxable supplies;

-services should be naturally bundled;

-supplied in ordinary course of business;

– one of the supply out of whole should be a principal supply.

7.3 Mixed Supply has been defined in Section 2(74) of GST Act, 2017 as below-

(74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

Further, tax liability on a mixed supply shall be determined as defined in Section 8 (b) of GST Act, 2017 which is as below-

“a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.”

7.4 the relevant portion of Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, are as below-

ANNEXURE to 11/2017-CT (R) Dated 28.06.2017

Notification No. 12/2017-Central Tax (Rate).

7.5 The relevant portion of the CBIC circular No, 32/06/2018-GST, dated 12-02-2018. is as below-

8. In view of aforesaid legal provisions, in order to examine the applicability of exemption/ taxability, there should be documentary evidences which support the contention of the applicant. In the instant case, documentary evidence like rent/lease agreement of the premises and License from the Local authority in respect of Hostel are keenly required. Further, Brochure mentioning thereunder the facilities / services which to be provided to the occupants of the said Hostel and Break up of fees to be charged from the occupants is also required to decide whether it is accommodation & lodging service or otherwise. Moreover, we find that the services to be supplied in the present case are more than two but in the absence of Brochure of Hostel facilities, Break-up of fees in respect of facilities/services to be provided, License from the Local Authority, Details of rooms occupancy and Rent/ lease Agreement etc; we are not in the position to decide whether the accommodation services alongwith allied services like service of Light, water, food etc. are only to be provided by Hostel or other services will be there. In the absence of above required documents/information, we are not in position to decide whether the said supply is mixed or composite supply. Thus, we are of the view that in absence of supporting documentary evidence in support of services to be provided by the applicant, how it can classify in HSN provided in the CGST Act, 2017 and thus there is no question to discuss the exemption under Sr. No. 14 of the of the Notification No. 12/2017-CT(Rate) dated 28.06.2017. Thus, with the limited material fact submitted by the applicant, with no Brochure of Hostel facilities, Break­up of fees in respect of facilities/services to be provided, License from the Local Authority and Rent Agreement etc.’ we find it prudent to refrain from pronouncing a Ruling. Therefore, no ruling is extended on the clarifications sought by applicant.

9. In view of the foregoing, we rule as follows: –

RULING

No ruling is extended for the reasons stated in para 8 above.