The Bengaluru bench of Authority of Advance Ruling has stated that hostels are not considered the same as regular houses, so they will not be exempted from GST.
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People living in hostels and paying guest accommodations (PGs) in Karnataka will now have to shell out more money as both hostels and PGs will now attract a 12% Goods and Services Tax (GST). This follows the decision of the Authority of Advance Ruling (AAR) in two different cases, one in Karnataka and another in UP.
The Authority of Advance Ruling stated that hostels were not considered the same as regular houses, so they would not be exempted from GST. The Karnataka AAR stated that accommodation provided in hostels, with shared rooms and no individual kitchen facility, did not qualify as residential dwellings.
Additional services like washing machines and TV would also be separately taxable. As a result, students staying in hostels may face increased costs with 12% GST on room rent and 18% on other services."PG or 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," the Bengaluru bench observed.
Earlier, till July 17, 2022, there was an exemption from GST for accommodation services provided by hotels, clubs, and campsites, as long as the charges were up to Rs 1,000 per day.
A company called Srisai Luxurious Stay LLP had asked for clarification from the AAR about their services. The AAR told them that the rent paid by people living in PGs or hostels didn’t qualify for the GST exemption because these services were not the same as renting a regular house for living. The AAR also mentioned that the company providing the hostel services would have to pay the GST to the government. So the company needed to get registered for GST and pay taxes for the services it offered.
"Residential dwelling is a residential accommodation meant for permanent stay and does not include guest house, lodge or like places. 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 further said.
A company called VS Institute & Hostel Pvt Ltd from Noida had a similar question for the AAR in Lucknow. There too the authorities ruled that from July 18, 2022, GST exemption would be given on hostel accommodation if the cost was less than Rs 1,000 per day.
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