GST: Hostel rent, PG accommodation to attract 12% tax, says Karnataka AAR

Rent paid for hostel accommodations and by paying guests will attract 12 per cent goods and services tax (GST), the Authority for Advance Rulings (AAR) in Karnataka said on Friday.

In two separate case orders, the GST-AAR said the hostel rent paid by inhabitants does not qualify for GST exemption as it is not a 'residential dwelling'.

The AAR, while hearing a case of Karnataka-based Srisai Luxurious Stay LLP, said that only rent for residential dwellings would qualify for GST exemption.

Srisai, which develops and manages PG accommodations and hostels in Karnataka, filed an application before the AAR and argued that since rent on these places is like that for residential dwellings, there should be no GST on it.

There is no GST on residential dwellings. Besides, hotels, inns, or guest houses where the rent is up to Rs 1,000 a day were also exempted.

In a notification issued in July 2022, the government ordered to lift the GST exemption for hotels and guest houses, where rent is up to Rs 1,000 a day. The notification was effective from July 18 that year.

AAR noted that hostel accommodation tariff below Rs 1,000 per day was only exempted from GST for a certain period and only up to July 17, 2022. Now on, hostel rent will attract GST at 12 per cent.

These rulings will increase the cost for students staying in hostels.

As per GST law, there is no GST if a residential dwelling is rented for the purpose of residence.

However, AAR held that a residential dwelling is an accommodation meant for permanent stay and doesn’t include guesthouse, lodge or like places.

The AAR further noted that if an accommodation provided a room and if people shared the same room with no individual kitchen facility, this won’t fall within the meaning of residential dwelling.

Further, washing machine facility and TV etc will not be bundled services and hence will be taxed separately.

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