GST on Hostel Accommodation: Tamil Nadu AAR Ruling TN/60/AAR/2023
Hostel accommodation services are taxable at 18% and do not qualify for residential dwelling GST exemptions.
- Ruling
- Advance Ruling No.60/AAR/2023 Dated:01.09.2023
- 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.
- The Tamil Nadu authority rejected the Karnataka High Court's view on this matter.
In short
The company asked if running a ladies' hostel for students and working women qualifies for the GST exemption meant for residential homes. The tax authority decided that because hostels provide commercial services like housekeeping and security, they are not the same as a private residence. Therefore, the business must pay GST on its services.
What has changed
How it worked before
Many hostel operators assumed their services were exempt from GST, often citing court rulings from other states that suggested renting rooms for long-term stays should be treated as residential housing.
What has changed
The authority ruled that hostel services are taxable at 18% as a composite supply. This means operators cannot claim the exemption for residential dwellings and must register for GST if their annual income crosses the standard limit.
Who this affects
Owners of hostels, paying guest accommodations, and similar residential 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 collect GST, believing their service was a residential exemption. Following this ruling, they must now register for GST and charge 18% tax on their monthly fees if their total turnover exceeds the registration threshold.
What you should do
If you run a hostel, you should review your tax position with a professional. Remember that this ruling only applies to the specific business that asked the question; it is not a law that automatically changes how every hostel in India is taxed.
If you do nothing
If you assume this ruling does not apply to you and stop collecting or paying GST, you risk being hit with tax demands, interest, and penalties later. A tax officer may disagree with your interpretation during an audit, leading to costly legal disputes. It is safer to seek a professional opinion based on your specific business model.
The terms explained
- Composite supply
- A package of two or more goods or services provided together that are naturally bundled. In this case, the room and the food are treated as one service, taxed at the rate of the main item, which is the room.
- Residential dwelling
- A property used primarily as a private home for living. The tax authority distinguishes this from commercial hostels that provide extra services like security and housekeeping.
- Aggregate turnover
- The total value of all taxable and exempt supplies made by a business across India. This figure determines if you are required to register for GST.
The ruling in detail
Authority for Advance Ruling
M/s. Lavender Residency
Advance Ruling No.60/AAR/2023 Dated:01.09.2023 · 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 also under Entry 13 of 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 of 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 afore mentioned 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, 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 ladies' residential hostel for students and working women, providing boarding and lodging facilities for a consolidated monthly charge. They provide single, double, or dormitory-style accommodation along with ancillary services like housekeeping and security. The applicant claims these services qualify as renting of residential dwellings for use as residence, thus seeking exemption from GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption eligibility | Not eligible for exemption Under Entry 12 of Notification 12/2017-CT (Rate) and Entry 13 of Notification 09/2017-IT (Rate) |
| Registration requirement | Required to register If aggregate turnover exceeds twenty lakh rupees |
| Tariff classification and rate | Taxable @ 9% CGST + 9% SGST Under Sl.No. 7(vi) of Notification 11/2017, Central Tax (Rate) |
| Taxability of in-house food | Taxable @ 18% as composite supply Accommodation is the principal supply |
| Applicability of Karnataka HC judgment | No ruling issued Does not fall under the scope of Section 97(2) of the GST Act |
The Authority ruled that hostel accommodation services provided by the applicant are not eligible for the requested GST exemption. Consequently, the applicant is required to obtain GST registration if their aggregate turnover exceeds the prescribed threshold. The services are classified 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. The exemption under Entry 12 of Notification 12/2017-CT (Rate) is strictly interpreted to apply only to residential dwellings used as residences by families or individuals. Because the services are not exempt, they constitute a taxable supply under the CGST Act. The provision of food and accommodation is considered a **composite supply** where the accommodation is the principal supply, attracting the 18% tax rate.
Provisions relied on
- Section 97(2) of CGST/TNGST Act, 2017
- Section 22 of CGST/TNGST Act, 2017
- Section 2(30) 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 clarifies that **hostel accommodation services** are generally considered commercial in nature and do not qualify for the residential dwelling exemption under GST. It establishes that such services are taxable at 18% as a composite supply. Practitioners should note that this decision explicitly rejects the applicability of the Karnataka High Court's ruling in the Taghar Vasudeva Ambrish case for this jurisdiction.
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/60_lavender_residency.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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