GST on Hostel Accommodation: Tamil Nadu AAR Ruling TN/86/AAR/2023
The Tamil Nadu Authority for Advance Ruling decided that hostel accommodation services are taxable at 18% and not exempt from GST.
- Ruling
- Advance Ruling No.86/AAR/2023 Dated: 04.09.2023
- 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 classified as commercial accommodation, not residential dwelling rentals.
- The 18% GST rate applies to the composite supply of lodging and food.
- Hostel operators must register for GST if their turnover exceeds the threshold.
- The Karnataka High Court ruling on this issue is not binding in Tamil Nadu.
In short
New Snekham Girls Hostel asked if their boarding and lodging services were exempt from Goods and Services Tax (GST) as residential rentals. The Authority for Advance Ruling (AAR) decided that hostels are commercial businesses, meaning their services do not qualify for the residential exemption.
What has changed
How it worked before
Many hostel operators assumed that providing long-term lodging qualified as renting a residential dwelling, which is typically exempt from GST.
What has changed
The AAR clarified that hostels are commercial establishments. This means operators must now treat their monthly fees as taxable income and charge 18% GST if their total annual turnover crosses the registration limit.
Who this affects
Owners of hostels, paying guest accommodations, and similar residential facilities for students or working professionals in Tamil Nadu.
An example
A hostel owner in Chennai provides rooms and meals to students for a monthly fee. Previously, they did not collect GST, believing it was a residential rental. Following this ruling, they should consult an accountant to determine if their turnover requires GST registration and if they must start charging 18% GST on their invoices.
What you should do
If you operate a hostel, review your tax status with a professional. Remember that this ruling only legally binds the business that asked for it; however, it signals how tax officers in Tamil Nadu will likely treat your business.
If you do nothing
If you assume you are exempt when you are not, you may face demands for unpaid tax, interest, and penalties during an audit. A tax officer is not required to follow your interpretation and can issue a notice for the full amount of tax you failed to collect.
The terms explained
- Composite supply
- A package of two or more goods or services provided together, where one is the main service and the others are naturally bundled with it.
- Residential dwelling
- A property used primarily as a private home for living, which the tax authorities distinguish from commercial lodging businesses like hostels.
- Advance ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
M/s NEW SNEKHAM GIRLS HOSTEL
Advance Ruling No.86/AAR/2023 Dated: 04.09.2023 · 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 Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended would at all be required to register under the GST Enactments by virtue of the exemption notification 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 Advance 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 college students and working women, providing boarding and lodging facilities for a monthly fee. They provide single, double, or dormitory-style accommodation and in-house food services to inmates. The applicant does not own the premises but rents them, and they claim their services qualify as renting of residential dwellings for use as residence.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility for exemption | Not eligible for exemption Under Entry 12 of Notification 12/2017-CT(Rate) and Entry 13 of Notification 9/2017-IT(Rate) |
| Requirement to register | Required to register If aggregate turnover in a financial year exceeds twenty lakh rupees |
| Applicable tariff and tax rate | Taxable at 18% GST Under Tariff heading 9963, Sl. No. 7(vi) of Notification 11/2017-CT(Rate) |
| Exemption for in-house food | Taxable at 18% as composite supply Hostel 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 the hostel accommodation services provided by the applicant are not eligible for the exemption under the cited notifications because they do not constitute renting of a residential dwelling for use as a residence. Consequently, the applicant is liable for registration if their aggregate turnover exceeds the threshold, and their services are taxable at 18% as a composite supply. The Authority also noted that the Karnataka High Court judgment relied upon by the applicant is not binding in this jurisdiction and is currently subject to a pending appeal.
Reasoning
The Authority reasoned that the term residential dwelling is not defined in the GST Act, but in common parlance, it does not include hostels which are commercial establishments. The services provided are considered a **business of supplying accommodation services** rather than renting for residential use. The Authority relied on the principle that **exemption notifications must be interpreted strictly** and that the applicant's activities constitute a composite supply where the principal supply is taxable. Provisions relied upon include Section 7, Section 22, and Section 2(30) of the CGST Act, along with various exemption and rate notifications.
Provisions relied on
- Section 98(4) of the CGST Act, 2017
- Section 98(4) of the TNGST Act, 2017
- Section 103(1) of the CGST Act, 2017
- Section 103(2) of the CGST Act, 2017
- Section 104 of the CGST Act, 2017
- Section 7 of the CGST Act, 2017
- Section 22 of the CGST Act, 2017
- Section 2(30) of the CGST Act, 2017
- Notification No. 12/2017-Central Tax (Rate)
- Notification No. 9/2017-Integrated Tax (Rate)
- Notification No. 11/2017-Central Tax (Rate)
For the practitioner
This ruling confirms that the Tamil Nadu AAR views hostel accommodation as a **taxable commercial service** rather than an exempt residential dwelling rental. It serves as a strong precedent for tax authorities to deny exemptions to similar hostel operators in the state. Practitioners should note that this decision explicitly rejects the applicability of the Karnataka High Court's ruling in the Taghar Vasudeva Ambrish case.
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/86_new_snekham_girls_hostel.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.