Coaching Institute Not Liable To Pay Service Tax On Hostel Fees Received For Non-Residential Courses: CESTAT

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that coaching institutes are not liable to pay service tax on hostel fees received for non-residential courses.

The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has quashed the demand of service tax of Rs.35,86,321 confirmed in the impugned order on account of non-payment of service tax under commercial training and coaching services on hostel fees received for non-residential courses.

The department has confirmed the service tax demand of Rs.35,86,321 on account of non-payment of service tax under commercial training and coaching services on hostel fees received for non-residential courses, the appellant submits that during the period in dispute, the Appellant provided two types of courses namely – residential and non-residential.

Students opting for “Residential Courses” had to compulsorily stay in the hostel accommodation provided by the Appellant and the course fee includes Hostel Charges. Service tax was charged by the Appellant on the entire amount billed towards Course Fee and Hostel Charges. So far as Non-Residential courses are concerned, the accommodation facility is optional and subject to availability and the course fee does not include such accommodational charges. Sometimes, certain outstation students who otherwise opted for non- residential courses upon request made to the Appellant, were offered such residential accommodation (depending on availability) and the

Appellant charged an amount separately from the students as hostel charges which is nothing but residential short term accommodation facility.

Since the facility provided by the Appellant to the students opting for Non-Residential courses are akin to residential accommodation, the Appellant did not charge service tax on the amount billed for the accommodation facility, which is amply clear from the sample copy of fee structures submitted by them.

The tribunal noted that the residential accommodation such as hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities have been specifically exempted from service tax. In view of the above clarification, it becomes absolutely clear that standalone accommodation service in a hostel for residential purposes would squarely fall under the exclusion clause provided under renting of immovable property services defined under section 65(90a) of the Finance Act.

The tribunal held that the stand-alone hostel charges collected for non-residential courses, have no connection with Commercial Training and Coaching services as defined under section 65(105)(zzc) of the Finance Act, in as much as, even if any student, who do not avail this service, would continue to avail the course offered by the Appellant and therefore, the question of payment of service tax does not arise.

Case Details

Case Title: M/s. Roy’s Institute of Competitive Examination Private Limited Versus Principal Commissioner of Service Tax-I, Kolkata

Case No.: Service Tax Appeal No. 75230 of 2016

Date: 01.05.2025

Counsel For Appellant: Rajarshi Dasgupta, Chartered Accountant

Counsel For Respondent: R. K. Agarwal, Authorized Representative

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