5% GST payable w/o ITC on Accommodation Service provided by Club for less than Rs. 7500/-, 18% leviable on higher rent with ITC: AAR [Read Order]

In a recent ruling, the West Bengal bench of the Authority for Advance Ruling ( AAR ) has ruled that a 5% GST is payable without input tax credit ( ITC ) on accommodation services provided by clubs for amounts less than Rs. 7,500, while a higher rate of 18% is applicable on rentals above Rs. 7,500 with ITC available.

The applicant, The Tollygunge Club Limited is a premier and elite club in Kolkata and is primarily engaged in providing club or association services, short-term accommodation, restaurant, catering services, etc. The applicant is in the business of a composite supply of catering services along with the renting of premises and has its own location.

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The applicant wants to know whether the lower rate of GST at  5% leviable on the composite supply of "outdoor catering together with renting of premises" under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended) shall be applicable.

In this case, the club is engaged in providing accommodation services for a tariff less than Rs. 7500. As the tariff is less than  Rs. 7,500, the club does not satisfy the definition of ‘specified premise‘ mentioned in the circular.

The bench placed reliance on circular no. 27/01/2018-GST dated 04.01.2018, where it was clarified that t the applicable rate of GST depends on the declared tariff value at the time of the rendition of service.

One of the main issues raised in this case by the club was whether the composite supply of catering service within the club premises along with renting of premises shall be liable to GST at  5% without ITC.

Another question raised was whether the club is mandatorily required to pay GST at 5% without ITC or the club has the option to charge GST at 18% with ITC considering the fact that the club being engaged in rendering accommodation service may increase the room tariff to Rs. 7,500/- and above during the peak season.

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The AAR bench comprising Dr. Tanisha Dutta and Mr. Joyjitbanik observed that the applicant must pay tax at the rate of 5% without ITC, provided that the club's room tariff does not exceed Rs. 7,500 per unit per day or its equivalent. However, the applicant will be required to pay tax at the rate of 18% if the tariff is found to be higher than Rs. 7,500 per unit per day.

To Read the full text of the Order CLICK HERE

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