GST on Hostel Accommodation: Tamil Nadu Advance Ruling TN/68/AAR/2023
The Tamil Nadu Authority for Advance Ruling decided that hostel accommodation is a taxable service, not an exempt residential dwelling.
- Ruling
- Advance Ruling No. 68 /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 exempt under GST notification 12/2017.
- Hostel accommodation is classified as a taxable commercial service.
- Food provided with lodging is a composite supply taxed at 18%.
- Hostel operators must register for GST if their turnover exceeds the threshold.
In short
The company asked if running a hostel for students and working women qualifies for the GST exemption given to residential dwellings. The tax authority decided that because hostels are commercial operations, they do not qualify for this exemption and must pay GST.
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 authority ruled that hostels are commercial businesses, not residential dwellings. This means hostel owners must now collect and pay 18% GST on their services if their annual turnover crosses the registration limit.
Who this affects
Owners of student hostels, working women's hostels, and similar residential lodging facilities.
An example
A hostel owner in Chennai provides monthly lodging and meals to students. They previously did not charge GST, believing their service was an exempt residential rental. Following this ruling, they should consult an accountant to determine if they must register for GST and start charging 18% on their monthly fees.
What you should do
If you run a hostel, you should review your tax status with a professional. Remember that an Advance Ruling only legally binds the business that asked for it; it is not a law that automatically applies to your specific business, though it shows how the tax department views this issue.
If you do nothing
If you assume your hostel is exempt and do not register for GST, you risk being penalized for non-payment of tax. A tax officer may issue a notice demanding the unpaid tax plus interest and penalties. Being wrong about your tax liability can lead to significant financial strain for your business.
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 incidental. In this case, the lodging is the main service and the food is incidental.
- Residential dwelling
- A property used primarily as a permanent home for living. The authority decided that hostels are commercial lodging, not permanent homes.
- Advance Ruling
- A formal decision from the tax department on how GST laws apply to a specific business's situation. It is only binding for the business that requested it.
The ruling in detail
Authority for Advance Ruling
M/s. Snekham Residency-I
Advance Ruling No. 68 /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 Notification-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, whether the incidental activity of supply of in-house food to the inmates of the hostel would also be exempt 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 students and working women, providing boarding and lodging facilities for a monthly charge. They provide single, double, or dormitory-style accommodation along with ancillary services like housekeeping and security. The applicant contends that these services qualify as renting of residential dwelling for use as residence and are thus exempt from GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption eligibility | Not eligible for exemption Under Entry 12 of Notification 12/2017-CT (Rate) and corresponding TNGST/IGST notifications |
| Registration requirement | Required to register If aggregate turnover in a financial year exceeds twenty lakh rupees |
| Tariff classification and rate | Taxable @ 9% CGST + 9% SGST Under Tariff heading 9963, Sl. No. 7(vi) of Notification 11/2017-CT (Rate) |
| Exemption for incidental food supply | Taxable @ 18% As a composite supply where accommodation is the principal supply |
| Applicability of Karnataka HC 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. Consequently, the applicant is liable for registration if their aggregate turnover exceeds the threshold and must pay GST on their services. 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. They relied on the definition of residential dwelling from the Taxation of Services Education Guide and noted that the applicant's premises are licensed as commercial/public buildings. The Authority concluded that the twin conditions of 'renting of residential dwelling' for 'use as residence' were not met. Therefore, the services are classified as a composite supply under heading 9963, taxable at 18%.
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 Notification No. 12/2017-Central Tax (Rate)
- Notification No. 11/2017-Central Tax (Rate)
For the practitioner
This ruling clarifies that **hostel accommodation is not exempt** as a residential dwelling and is subject to GST at 18% as a composite supply. It serves as a strong precedent for tax authorities in Tamil Nadu to deny similar exemption claims by hostel operators. Practitioners should note that the Authority explicitly distinguished hostels from residential dwellings, effectively **taxing the hostel sector**.
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/68_sneham_residency_1.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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