The AAR’s ruling is likely to increase the cost of living for students who stay in hostels.
New Delhi: The Authority of Advance Ruling (AAR) has ruled that hostel accommodation will now be subject to a 12% GST. The AAR stated that hostels are not considered residential dwelling units and therefore do not qualify for GST exemption. This means that students and other individuals who stay in hostels will now have to pay an additional 12% tax on their rent.
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The Authority of Advance Ruling (AAR) has ruled that hostel accommodation will no longer be exempt from GST. The AAR stated that only rent for residential dwellings would qualify for GST exemption, and that hostels do not meet this definition. The AAR’s ruling comes after the government lifted the GST exemption for hotels and guest houses where the rent is up to Rs 1,000 a day. This exemption was only in effect until July 17, 2022, so hostel rent has been subject to GST since then.
12% GST Added to Student’s Rent
The AAR’s ruling is likely to increase the cost of living for students who stay in hostels. This is because the 12% GST will be added to the rent that students already pay. The AAR’s ruling is also likely to have an impact on the hostel industry, as it could lead to lower occupancy rates and decreased profits, as per Busiess Today.
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“PG/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 was quoted saying in the Mint.
The Karnataka Authority for Advance Ruling (AAR) has ruled that GST on reverse charge will be applicable on the rental that a hostel operator pays to the landowner. The AAR stated that the hostel operator’s services are leviable to GST, and that the hostel operator must obtain GST registration.
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GST on Reverse Charge Applicable
The AAR also stated that a residential dwelling is a residential accommodation meant for permanent stay, and does not include guest houses, lodges, or similar places. In this case, the hostel operator is providing PG/hostel services, which are akin to guest house and lodging services. Therefore, the hostel operator’s services cannot be considered residential dwellings, and GST on reverse charge will be applicable on the rental that the hostel operator pays to the landowner.
The Goods and Services Tax (GST) law exempts rent for residential dwellings from GST. However, the Authority of Advance Ruling (AAR) has held that a residential dwelling is an accommodation meant for permanent stay and does not include guesthouses, lodges, or similar places.
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Further, the AAR has held that washing machine facility and TV, etc., will not be bundled services and hence will be taxed separately. This means that if a hostel provides these facilities, it will have to pay GST on the cost of providing these facilities, in addition to the rent, as per Business TODAY.
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