Ramnath Bhimsen Charitable Trust (“the applicant”) is running a girls hostel in the name of Shree Ramesh Sewa Sadan and Godavari Sewa Sadan (‘’hostel”). The hostel is being run by a charitable trust which is a non-profit entity, accordingly the income tax department has also given the exemption certificate as the hostel is not working for profit.
Further, it provides accommodation to girls in hostel against a charge of Rs.6,000/ Rs.7,000 per month per boarder and it also provides to occupants ancillary services such as food, parking facility, hot water facility, guest rooms and temple without any extra charges.
- Whether the activity of providing the hostel on rent to various boarder is exempted? If it is exempted in such case, under which exemption notification the same is exempted,
- Whether the activity of providing the hostel on rent to various boarder is taxable? If it is taxable, in such case, under which service access code the same is taxable?
Applicant’s Interpretation of Law:
The trust is carrying the charitable activities the Income-tax Department has given the exemption certificate under section 12A of the Income-tax Act, 1961 as to the hostel charges from the boarders in order to bear its maintenance and administrative costs. Accordingly, the Trust is not supposed to pay any income tax on the receipts of the hostel, as the running of hostel is covered under the charitable activity.
The Hon’ble Authority for Advance Ruling, Chhattisgarh vide Advance Ruling No. STC/AAR/11/2018 dated March 2, 2019 held that the activity of providing accommodation services to girls by the applicant in its hostel for which the applicant is collecting an amount below the limit of Rs 1,000 per day and no other charges are being collected for providing other facilities therein such as canteen food, parking space for vehicles, coaching, library, entertainment, etc. merits exemption as stipulated under Notification No. 12/2017-State Tax (Rate) under Serial No. 14, Chapter 9963. The amount received by applicant for such supply falling under Tariff Heading No. 9963 certifies being treated as nil rate tax exempted supply.
Citation: 105 taxmann.com 153 (AAR – CHHATTISGARH)