Bengaluru: Hostel accommodation not GST exempt, AAR ruling clarifies classification
New Delhi, July 30: In a recent ruling, the Bengaluru bench of the Authority of Advance Ruling (AAR) declared that students availing hostel accommodation would have to pay a 12 per cent Goods and Services Tax (GST) on the rent. The AAR clarified that hostels are not classified as residential dwelling units and thus do not qualify for GST exemption.
The AAR's ruling came in response to two separate cases. Srisai Luxurious Stay LLP sought an advance ruling, and the AAR stated that GST exemption on accommodation services, for charges up to Rs 1,000/- per day, was applicable only until July 17, 2022, for hotels, clubs, and campsites.
The Bengaluru bench clarified that the rent paid for PG/hostel accommodation would not qualify for GST exemption, as the services provided were not akin to renting a residential dwelling for permanent residence. Consequently, the applicant offering such services must obtain GST registration, and GST on reverse charge will apply to the rental paid to the landowners.
The AAR differentiated between residential dwellings and PG/hostel services, stating that residential dwelling units are meant for permanent stays and exclude guest houses, lodges, or similar establishments. As the applicant admitted to providing PG/hostel services, which fall under "paying guest accommodation/hostel" and are similar to guest house and lodging services, they cannot be considered residential dwellings.
In a related reference by V S Institute & Hostel Pvt Ltd in Noida, the Lucknow bench of AAR also affirmed that GST would apply to hostel accommodation costing less than Rs 1,000 per day from July 18, 2022, onwards.
The imposition of a 12 per cent GST on student accommodation in hostels and dormitories may result in increased costs for Indian families. Rajat Mohan, Senior Partner at AMRG & Associates, urged the GST council to consider policy decisions to offset the tax burden across the entire education ecosystem, including student accommodation.
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- With inputs from agencies
