Bad news for students, GST to be imposed on PG, Hostel and accommodation with 12% rate

Students will have to shell out more for hostel accommodation as a 12 per cent GST would be applicable on the rent paid, the Authority of Advance Ruling said 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).

The AAR stated in an advance ruling requested by Sri sai Luxurious Stay LLP that GST exemption was valid on accommodation services charged up to Rs 1,000/- per day offered by hotels, clubs, campsites, and so on until July 17, 2022.
“PG/Hostel Rent paid by inhabitants do not qualify for GST exemption because the services provided by applicant are not akin to renting of residential dwelling for use as residence,” the Bengaluru bench ruled.

As the applicant’s services are leviable to GST, GST on reverse charge will be applied on the rental to be paid to landowners by the application, and thus the applicant must seek GST registration, it noted.
“A residential dwelling is a permanent residence that does not include a guest house, lodge, or similar establishments.”

“As a result, beginning July 18, 2022, services provided by an applicant will be (covered under GST for taxation),” said the Lucknow bench AAR.
According to AMRG & Associates Senior Partner Rajat Mohan, a 12% tax on student housing in hostels and dorms will result in increased costs for Indian families.

“The GST council may consider making a policy decision to neutralize the tax cost built into the entire education ecosystem,” Mohan said.

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