Boarding facility provided along with lodging, housekeeping etc., considered as a ‘mixed supply’, taxable at 18%: AAR of West Bengal

Categories: Advance Ruling
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Fact: M/s. Sarj Educational Centre (“the applicant”) is the owner of a private boarding house and is providing services of lodging and food exclusively to the students of a secondary school, run by a Charitable Society, namely Sunshine Educational Society.

Issues Involved: The applicant has sought advance ruling in respect of the following questions:

  1. Whether his service to the students for lodging along with food is a composite supply within the meaning of Section 2(30) of the GST Act, 2017?
  2. Whether supply of such service is eligible for exemption under Sl. No. 14 of Notification No. 12/2017–CT (Rate) dated June 28, 2017?
  3. What should be the rate of tax for the combination of services he provides, if it is not considered a composite supply.

Applicant’s Interpretation of law:  The applicant entered into an MOU with St. Michael’s School under the management of Sunshine Educational Society, for providing boarding facility exclusively to the students of the said school.The boarding facility shall include lodging, housekeeping, laundry, medical assistance and food. The consideration is a consolidated charge on the individual boarder for the combination of the services.

The applicant further refers to Circular No. 32/06/2018 dated February 12, 2018 issued by CBIC, It was clarified that any accommodation service to students in a hostel having declared tariff below one thousand rupee per day is exempt under Sl. No. 14 of the exemption notification, the applicant further refers to Sl. No. 66 of the exemption notification, and argues that his services to the boarders should also be considered exempt under that entry of the said notification.

Held: The Hon’ble AAR of West Bengal vide its Advance Ruling Order No. 42/WBAAR/2018-19 dated February 26, 2019 stated that the Applicant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility. Each of the recipients, however, is charged a consolidated amount for the combination of services he wants to enjoy. The combination of services is, therefore, offered as a mixed supply within the meaning of Section 2(74). In accordance with Section 8(b) of the GST Act it is stated that, “a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.”

Therefore, each of the combinations includes services taxable at 18% rate, which is the highest rate applicable to the services being offered vide Section 8(b) of the GST Act. Being mixed supply, value of the entire combination of services offered is taxable at 18% rate.

Citation: [TS-86-AAR-2019-NT]