Accommodation costs are all set to increase for students as a 12 percent GST will now be levied to rent payments for hostel rooms and Paying Guest (PG) accommodations. In two distinct rulings, the Uttar Pradesh and Karnataka Authority of Advance Rulings’ (AAR) have classified these accommodations as ‘non-residential’, making them liable for 12 percent GST, similar to small hotels and inns.
The Bengaluru AAR bench noted that hostels are not considered residential dwelling units, and hence, are not exempt from GST. The AAR’s ruling was in response to an inquiry from Sri Sai Luxurious Stay LLP. Additionally, the AAR stated that accommodation services offered by hotels, clubs, campsites, etc., with charges up to Rs 1000 per day, were eligible for GST exemption until July 17, 2022.
It is also noteworthy that no GST is applicable if a house is rented for residential purposes by individuals who are not required to register for GST.
The Lucknow bench of the AAR ruled that GST would be applicable to hostel accommodations costing less than Rs 1000 per day, in a similar case referred by Noida-based V S Institute & Hostel Pvt Ltd. ‘Hence, from July 18, 2022 onwards, services provided by an applicant will be covered under GST for taxation.’, the Lucknow bench AAR said.
Tax experts have predicted that the rulings issued by the Karnataka and UP AARs will be considered ‘permanent precedents’ by the GST council and that the absence of PGs and hostels from the GST law created a loophole.
