12% GST On Hostel and PG Accommodation Services
Living in a hostel or PG may become more costly in the future. How? Let’s understand.
In two separate rulings, the GST-Authority for Advance Rulings (AAR), has held that hostel and PG rent paid by inhabitants does not qualify for exemption under goods and service tax (GST) because it is not a residential dwelling. It further pointed out that the hostel accommodation tariff below INR 1000 per day was exempted from GST for a certain period. Hostel rent will now attract GST at 12%.
The applicants:
- Bengaluru–based M/S. Srisai Luxurious Stay LLP offers guest accommodation, service apartments, flats, and paying guest accommodation, and is engaged in the business of providing services like furnished rooms, security, housekeeping, meals, washing machine facility, television in each room, internet access, and vehicle parking to the paying guests.
- Noida-based V.S. Institute and Hostel, which offers students PG and hostel facilities, submitted that it provides residential facilities along with food, water, Wi-Fi, and electricity and these should be covered under the residential dwelling.
Currently, there is no GST levied if a residential dwelling is rented for residence to GST-unregistered individuals, like students, small business owners, and salaried individuals.
However, AAR in both cases, differentiated a residential dwelling from a hostel by saying that a residential dwelling is an accommodation used for permanent stay and does not include the lodge, guesthouse, PG like places.
The Karnataka bench clarified that the accommodation offered was not a residential dwelling but a room. Unrelated people can share the room and invoices are raised individually every month. No individual kitchen facility is available. In addition, various add-on facilities, like vehicle parking, washing machines, and television are optional and would not be bundled under services.
The verdict
The ruling doesn’t apply to hostels and PGs across the country yet. The reason is an AAR ruling is binding for the parties (applicants) involved. In the case of the Karnataka and UP AAR decision, the 12 percent GST ruling would apply to hostels and PGs in Noida and Bengaluru.
Experts trust that such a ruling can be applicable across hostels all over the country only if the GST council pronounces the matter or by a circular from CBIC. If it happens, undoubtedly the hostel and PG will become costlier.
