Lodging along with Food to Students by a Private Boarding House is a Composite Supply, 18% GST applicable: AAR [Read Order]

The Advance Ruling Authority ( AAR ), West Bengal has held that the lodging along with food supplied to the students by a private boarding house, being a composite supply is not eligible for GST exemption and is taxable at 18% under the GST regime.

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 is charged a consolidated amount for the combination of services he wants to enjoy.

The applicant claimed that it has 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 claimed exemption by relying on the CBIC Circular wherein it was clarified that the accommodation service to students in a hostel having declared tariff below one thousand rupee per day is exempt.

The authority observed that “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.” As has already been discussed, each of the combinations includes services taxable at 18% rate, which is the highest rate applicable to the services being offered to vide Section 8(b) of the GST Act. Being mixed supply, the value of the entire combination of services offered is taxable at 18% rate.”

While disposing of the application, the authority held that “the Applicant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility. None of the combinations of services being offered is a composite supply, as defined under section 2(30) of the GST Act. They are mixed supplies within the meaning of section 2(74) and taxable in accordance with section 8(b) of the GST Act. Being mixed supply, the value of the entire combination of services offered is taxable at the applicable rate.”