GST on Hostel Accommodation: Tamil Nadu Advance Ruling TN/37/AAR/2023
Hostel accommodation services are taxable at 18% and do not qualify for the residential dwelling GST exemption.
- Ruling
- Advance Ruling No.37/AAR /2023 Dated:31.08.2023
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Hostel services are not considered residential dwellings for GST exemption purposes.
- Providing food and lodging together is a composite supply taxable at 18%.
- Hostel operators must register for GST if their turnover exceeds the threshold.
In short
Arihant Hostel asked the Authority for Advance Ruling (AAR) if their boarding and lodging services were exempt from Goods and Services Tax (GST) as residential dwellings. The authority decided that hostels are commercial establishments, not residential homes, and therefore do not qualify for the tax exemption.
What has changed
How it worked before
Many hostel operators assumed their services were exempt from GST, often citing court rulings that suggested renting rooms for long-term stays should be treated as residential dwelling rentals.
What has changed
The authority ruled that hostel services are taxable at 18% because they provide commercial lodging rather than a private residence. This means if your hostel's annual turnover crosses the registration limit, you must collect and pay GST on the full amount charged to inmates, including food.
Who this affects
Owners of hostels, paying guest (PG) accommodations, and similar boarding facilities for students or working professionals.
An example
A hostel owner in Chennai provides beds and meals to students for a monthly fee. They previously did not charge GST, believing it was a residential service. After this ruling, they should consult a tax professional to determine if their turnover requires them to register and start charging 18% GST on their monthly fees.
What you should do
Review your current tax filings and turnover. Remember that an Advance Ruling only binds the business that asked for it and their specific tax officer; it is not a law that automatically applies to your business, though it shows how the department currently views this issue.
If you do nothing
If you assume your services are exempt and do not register, you risk being penalized for non-payment of tax. A tax officer may issue a demand notice for the unpaid GST, plus interest and heavy penalties, if they determine your business is a commercial service.
The terms explained
- Composite supply
- A package of two or more goods or services provided together that are naturally bundled. In this case, the lodging and food are treated as one service, taxed at the rate of the main service.
- Residential dwelling
- A property used primarily as a private home for living. The authority ruled that hostels do not fit this definition because they are commercial businesses.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business's situation. It is not a general law for all businesses.
The ruling in detail
Authority for Advance Ruling
M/s. Arihant Hostel
Advance Ruling No.37/AAR /2023 Dated:31.08.2023 · Tamil Nadu
Questions before the authority
- Whether the hostel and residential accommodation extended by the Applicant hostel would be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017 and under the identical Exemption Notification No.9/2017 - Integrated Tax-Rate dated 28.06.2017 as amended?
- Whether the Applicant hostel being eligible for exemption under Sl. No. 12/2017 (CT-Rate) dated 28.06.2017 as amended would at all be required to take registration under the GST Enactments, by virtue of the Exemption Notifications as aforementioned and also under the provisions of Section 23 of the CGST/TNGST Act, 2017?
- Whether any specific tariff entry is applicable to hostels under the Tariff Notification, in the event of requirement of registration?
- Whether, in the event of the hostel accommodation being an exempt activity, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt being in the nature of a composite exempt supply?
- Whether the judgement of the Division Bench of the Hon'ble Karnataka High Court in the case of Taghar Vasudeva Ambrish vs Appellate Authority for Advanced Ruling, Karnataka reported in Manu/KA/0327/2022 is applicable to the facts of the applicant?
Facts
The applicant operates a men's hostel providing boarding and lodging facilities to students and working professionals. They charge a consolidated monthly fee per bed, which includes ancillary services like housekeeping and security, and provide in-house food. The applicant claims these services qualify as renting of residential dwelling for use as residence and are thus exempt from GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility for exemption under Entry 12 of Notification 12/2017-CT (Rate) | Not eligible for exemption None |
| Requirement for registration | Required to register if aggregate turnover exceeds twenty lakh rupees None |
| Applicable tariff entry | Tariff heading 9963, taxable at 9% CGST + 9% SGST Under Sl.No. 7(vi) of Notification No. 11/2017, Central Tax (Rate), as amended |
| Exemption for in-house food as composite supply | Taxable at 18% as a composite supply Accommodation is the principal supply |
| Applicability of Taghar Vasudeva Ambrish judgment | No ruling issued Question does not fall under the scope of Section 97(2) of the GST Act |
The Authority ruled that hostel accommodation services are not eligible for the exemption meant for residential dwellings and are instead taxable as a supply of services. Consequently, the applicant is required to register under the GST Act if their aggregate turnover exceeds the threshold. The supply of food and accommodation is treated as a composite supply with the accommodation as the principal supply, taxable at 18%.
Reasoning
The Authority reasoned that hostel accommodation is not equivalent to a residential dwelling used as a residence, as it is a commercial activity providing temporary lodging with ancillary services. It relied on the strict interpretation of exemption notifications, noting that the applicant's premises are registered as commercial establishments. The ruling turned on the definition of 'residential dwelling' and the classification of the services under Section 2(30) and Section 8 of the CGST Act regarding composite supplies. The Authority distinguished the applicant's business from the renting of a residential dwelling by a family or individual.
Provisions relied on
- Section 98(4) of CGST Act, 2017
- Section 97(2) of CGST Act, 2017
- Section 2(30) of CGST Act, 2017
- Section 8 of CGST Act, 2017
- Entry 12 of Exemption Notification No. 12/2017-Central Tax (Rate)
- Notification No. 11/2017, Central Tax (Rate)
For the practitioner
This ruling confirms that **hostel accommodation services are taxable** and do not qualify for the residential dwelling exemption. It clarifies that such services are treated as a **composite supply** taxable at 18% when food is included. Practitioners should note that this ruling explicitly rejects the application of the Karnataka High Court's decision in Taghar Vasudeva Ambrish for the purpose of this specific AAR.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/37_arihant_hostel.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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