In two separate rulings by the Uttar Pradesh and Karnataka AARs, it has been clarified that rent paid for hostel and paying guest (PG) accommodations will now be liable to 12% GST. This is because these accommodations have been categorized as “non-residential” and do not qualify for the GST exemption that is available for “residential dwellings.”
The GST exemption for residential dwellings is available under SI No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. This exemption is available for renting of residential dwelling for use as residence by individuals who are not required to register for GST.
However, the AARs have ruled that hostel and PG accommodations do not qualify for this exemption because they are not “residential dwellings.” The AARs have defined a “residential dwelling” as a “building or part of a building, other than a hotel, in which a person resides for human habitation.”
The AARs have noted that hostel and PG accommodations do not meet this definition because they do not provide the same level of facilities as a home. For example, hostel and PG accommodations typically do not have individual kitchens or cooking facilities, and they often have shared bathrooms.
As a result of the AARs’ rulings, rent paid for hostel and PG accommodations will now be liable to 12% GST. This will have implications for both hostel owners and tenants.
For hostel owners, the ruling means that they will need to register for GST and collect GST from their tenants. They will also need to file GST returns and pay GST to the government.
For tenants, the ruling means that they will need to pay GST on the rent they pay to hostel owners. This will increase the cost of living for tenants who live in hostels and PGs.
The AARs’ rulings are a significant development for the hostel and PG industry in India. They are likely to lead to an increase in the cost of hostel and PG accommodation, and they could also make it more difficult for hostel and PG owners to compete with hotels.