GST Advance Ruling Rejected for Third-Party Hostel Operations
The Authority for Advance Ruling rejected a request regarding hostel taxability because the applicant was not the one providing the service.
- Ruling
- Advance Ruling No. 63/ARA/2025, dated 17.12.2025
- Dated
- 17 Dec 2025
- 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
- Imperial Graphics asked about GST on hostel services run by their tenant.
- The Authority rejected the application because the applicant does not operate the hostel.
- Advance rulings only cover services provided by the applicant themselves.
In short
Imperial Graphics asked the Authority for Advance Ruling (AAR) whether hostel services provided by their tenant were exempt from Goods and Services Tax (GST). The Authority refused to answer, stating that an applicant can only ask about their own business activities, not those of a tenant.
What has changed
How it worked before
Businesses often assumed they could seek clarity on the tax status of properties they own, even if they lease them to others who operate the actual business.
What has changed
The Authority clarified that under Section 95(a) of the Central Goods and Services Tax (CGST) Act, an advance ruling is strictly limited to the applicant's own supply of goods or services. If you are merely the landlord, you cannot use the AAR process to determine the tax liability of your tenant's business operations.
Who this affects
Property owners who lease buildings to third parties for use as hostels, guest houses, or commercial operations.
An example
Imagine a business owner, 'City Rentals', who leases a building to a coaching center that provides student housing. If City Rentals asks the AAR if the coaching center's hostel fees are exempt from GST, the AAR will reject the request. The AAR will tell City Rentals that they must ask about their own rental income, not the tenant's hostel services.
What you should do
If you are a landlord, do not expect the AAR to rule on your tenant's tax obligations. Remember that an advance ruling is only binding on the specific person who asked for it and their own tax officer; it does not set a general rule for all businesses.
If you do nothing
If you assume this ruling or any other AAR decision applies to your business, you risk miscalculating your tax liability. A tax officer may disagree with your interpretation, leading to penalties, interest, and lengthy legal disputes. Always consult a tax professional regarding your specific business structure.
The terms explained
- Advance Ruling
- A formal decision from tax authorities on how GST applies to a specific business activity. It is meant to provide certainty to the person asking.
- Composite Supply
- A package of two or more goods or services sold together that are naturally bundled. The tax rate for the entire package is usually determined by the main item.
- Residential Dwelling
- A property used primarily as a residence for living purposes, rather than for commercial or business use.
The ruling in detail
Authority for Advance Ruling
M/s. Imperial Graphics Private Limited
Advance Ruling No. 63/ARA/2025, dated 17.12.2025 · Tamil Nadu
Questions before the authority
- Whether the hostel and residential accommodation extended to the students run by the Applicant's tenant can be considered as "Residential Dwelling" and is 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 for the period of 01.07.2017 to 11.07.2024?
- Whether the hostel facility extended to students by the Applicant's tenant falls under Entry 12A inserted vide Notification No. 4/2024-Central Tax (Rate) dated 12.07.2024 with effect from 12.07.2024 as the conditions laid down in the Entry has been fulfilled?
- 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?
- Whether the judgement of the Hon'ble Madras High Court in the case of Thai Mookambika Hostel v. The Union of India reported in [2024] 160 taxmann.com 667 (Madras), is applicable to the facts of the applicant?
Facts
The applicant is a private limited company that owns two residential properties in Coimbatore. It has leased these properties to a third-party trust, which operates them as a hostel for students. The applicant sought an advance ruling on the GST taxability of these services and the applicability of various judicial precedents to their specific business arrangement.
Ruling
| Question | What the authority ruled |
|---|---|
| Admissibility of application | Rejected The application was rejected because the activities in question are performed by the applicant's tenant, not the applicant. |
The Authority rejected the application for an advance ruling in its entirety. It determined that the questions raised do not pertain to an activity being undertaken or proposed to be undertaken by the applicant itself, but rather by its tenant. Consequently, the application was found to be inadmissible under the provisions of the CGST Act.
Reasoning
The Authority relied on the definition of 'advance ruling' under Section 95(a) of the CGST Act, 2017, which limits rulings to matters concerning the supply of goods or services undertaken or proposed by the applicant. Since the applicant is merely the lessor and the hostel operations are conducted by the tenant, the queries do not meet the statutory criteria for an advance ruling. Furthermore, the Authority noted that under Section 103(1), a ruling is only binding on the applicant who sought it, rendering the request for applicability of external case law irrelevant to the applicant's own tax liability. The application was therefore rejected under Section 98(2) of the CGST Act.
Provisions relied on
- Section 95(a) of the CGST Act, 2017
- Section 97(2) of the CGST Act, 2017
- Section 98(2) of the CGST Act, 2017
- Section 103(1) of the CGST Act, 2017
For the practitioner
This ruling serves as a **procedural warning** that an applicant cannot seek an advance ruling on the taxability of activities performed by their tenants or third parties. It confirms that the AAR will **reject applications** where the applicant is not the direct supplier of the services in question. It does not provide any substantive guidance on the taxability of hostel services.
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/5-imperial_graphics_aar_order-1.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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