PG/Hostel Rent paid by inhabitants do not qualify for GST exemption… as the services provided by applicant are not akin to renting of residential dwelling for use as residence, said the Bengaluru bench.
PG/Hostel Rent paid by inhabitants do not qualify for GST exemption… as the services provided by applicant are not akin to renting of residential dwelling for use as residence, said the Bengaluru bench.
PremiumA 12 per cent GST will now be levied on rent paid for hostel accommodations and by paying guests, the Authority of Advance Ruling (AAR) announced in two separate cases. The Bengaluru bench of the Authority of Advance Ruling (AAR) said hostels are not akin to residential dwelling units and hence are not exempt from Goods and Services Tax (GST).
In an advance ruling sought by Srisai Luxurious Stay LLP, the AAR said that GST exemption was applicable on the accommodation services, of charges up to ₹1,000/- per day, provided by hotels, clubs, campsites etc. till July 17, 2022.
"PG/Hostel Rent paid by inhabitants do not qualify for GST exemption… as the services provided by applicant are not akin to renting of residential dwelling for use as residence," said the Bengaluru bench.
MP Ravi Prasad and Kiran Reddy T of the Karnataka AAR ruled that GST on reverse charge will be applicable on the rental to be paid to the landowners by the applicant as the services of the applicant are leviable to GST and thus the applicant has to obtain GST registration, it added. Residential dwelling is a residential accommodation meant for permanent stay and does not include guest house, lodge or like places, according to the bench.
In the instant case, the applicant in his own admission claims to be providing PG/hostel services which inter alia refer to 'paying guest accommodation / hostel' services and are akin to guest house and lodging services and therefore can't be termed as residential dwelling'," the Bengaluru bench said.
In a similar reference by Noida-based V S Institute & Hostel Pvt Ltd, the Lucknow bench of the AAR said that GST would apply on hostel accommodation costing less than ₹1,000 per day.
"Hence, from July 18, 2022, onward services provided by an applicant will be (covered under GST for taxation)…," the Lucknow bench AAR said.
AMRG & Associates Senior Partner Rajat Mohan said 12 per cent tax on student accommodation in hostels and dormitories would lead to a higher cost for Indian families.
"The GST council may consider taking a policy decision to neutralise the tax cost built into the entire education ecosystem, including student's accommodation," Mohan said.
VIDEO | "Authority of Advance Ruling has said that hostel accommodation given to students should not be exempted from GST. The reason given is that 'residential dwelling' should be on a long-term basis," says
Tax Expert Ved Jain said that the reason given by AAR on levying a 12 per cent GST over hostel or PG accommodation is that any residential accommodation should be on a long-term basis. However, hostel or PG accommodations which involve sharing of multiple beds or several people sharing a common space does not fall under the ambit of 'residential dwelling'. So, such accommodations will not attract GST, as per AAR.