GST on PG Accommodation: 90-Day Exemption, ITC and Taxability FAQs

Summary: The article examines the GST treatment of Paying Guest (PG) and hostel accommodation services, including the exemption for accommodation services subject to the ₹20,000 per person per month value limit and minimum continuous period of 90 days under Entry 12A of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 4/2024-Central Tax (Rate). It discusses the treatment where accommodation charges exceed ₹20,000, including situations involving separately identifiable food or other supplies; the distinction between taxable and exempt guests; whether PG accommodation constitutes a continuous supply of services; and the time of supply under Section 13 of the CGST Act, 2017. The article also examines the consequences where a guest vacates before 90 days, including the competing views on interest under Section 50 of the CGST Act. Further issues considered include food and ancillary facilities supplied with accommodation, ITC restrictions under Section 17 of the CGST Act and Rules 42 and 43 of the CGST Rules, treatment of hostels as residential dwellings in light of The State of Karnataka & Anr. Versus Taghar Vasudeva Ambrish & Anr., and GST on buildings leased by PG operators. The final FAQ addresses the composition scheme and the treatment of exempt supplies within turnover in a State under Section 2(112) of the CGST Act.

Introduction: The applicability of Goods and Services Tax (GST) on Paying Guest (PG) accommodation services has been a subject of considerable practical interest, particularly in view of the exemption available to certain accommodation services under the GST law. The issue involves various aspects, including the conditions prescribed for exemption, the requirement of a minimum continuous stay, the determination of whether PG accommodation constitutes a continuous supply of services, the time of supply, and the GST implications where the prescribed conditions for exemption are not fulfilled. Further, questions frequently arise regarding the taxability of food and other ancillary facilities provided along with accommodation, availability of Input Tax Credit (ITC), treatment of PG accommodation as a “residential dwelling”, and the GST implications on premises leased by PG operators for providing accommodation services.

With the increasing prevalence of PG accommodation, particularly among students and working professionals, these issues have assumed greater practical significance for both PG operators and tax professionals. The following FAQs seek to address the key issues relating to the applicability of GST on PG accommodation services by examining the relevant provisions of the GST law along with the judicial principles applicable to such services.

GST Exemption for PG and Hostel Accommodation

1. Whether PG accommodation services provided by hostels are exempt from GST?

Ans: – As per Entry 12A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, PG accommodation services provided by hostels are exempt from GST only when the following two conditions are satisfied:

i. The value of supply does not exceed ₹20,000 per person per month.

ii. Minimum continuous period of 90 days.

In all other cases the PG accommodation services are taxable. However, even in the case of total consideration exceeds ₹20,000 per person per month, PG operators may examine whether the consideration attributable to accommodation and other independently identifiable supplies, such as food, can be separately determined based on the actual nature and terms of the supplies.

For example, where ₹15,000 is attributable to accommodation and ₹6,000 is attributable to food, the GST treatment of each supply would need to be examined independently.

However, such segregation should reflect the genuine nature and value of the respective supplies and should not be undertaken merely for obtaining the exemption. Merely splitting the consideration and issuing separate invoices, without there being a genuine basis for treating the supplies separately, may be regarded as an artificial arrangement and could result in disputes and litigation with the tax authorities.

2. In a PG, for some guests who are opting for premium services they are charging fee more than 20,000 p.m and for normal guests they are charging below 20,000 p.m ? In this scenario GST should be paid on entire fee?

Ans: – No, GST would be charged only for the guests who has opted for premium services and paying fee more than 20,000 p.m for others who are paying fee below 20,000 p.m GST would not be applicable.

Continuous Supply and Time of Supply of PG Accommodation

3. Are PG accommodation services a continuous supply of services under GST?

Ans: – A service to qualify as a continuous supply of services, the following conditions must be satisfied:

i. The contract provides for periodic payment obligations; and

ii. The service is provided or agreed to be provided on a recurrent basis for a period exceeding three months.

In the case of PG accommodation services, there are generally periodic payment obligations (for example, a monthly accommodation fee). Therefore, where the accommodation is provided or agreed to be provided on a recurrent basis for a period exceeding three months, it would qualify as a continuous supply of services.

Conversely, where the agreed period does not exceed three months, it would generally be treated as a non-continuous supply of services.

Accordingly, whether PG accommodation services constitute a continuous supply of services depends on the terms of the contract, particularly the agreed period of stay and the existence of periodic payment obligations.

4. When should a PG operator discharge GST on PG accommodation services?

Ans: – The time of supply depends on whether it is continuous supply of service or non -continuous supply of service. If it is continuous supply of service time of supply would be on or before the due date of payment.

For eg :- If every month hostel fee is supposed to be paid on 2nd, then invoice should be issued on or before 2nd and that would be the time of supply.

Even in case of non-continuous supply of service, if invoice is issued the date of invoice would be time of supply.

GST Liability Where the 90-Day Stay Condition Is Not Fulfilled

5. If a guest vacates a PG after two months and the monthly charges are below ₹20,000, will GST apply?

Ans: – Yes although the consideration charged is less than ₹20,000 per month, the exemption under Entry 12A of Notification No. 12/2017-Central Tax (Rate) would not be available because the condition of a minimum continuous stay of 90 days is not fulfilled. Accordingly, the PG accommodation services would be liable to GST.

6. In the above case, at what point does GST become payable?

Ans: – Let us understand this with the help of an example.

Mr. A, a student, joined XYZ PG on 1 April 2026 with an agreed period of stay of six months. The monthly accommodation fee was ₹10,000, payable on the 1st day of every month. Accordingly, Mr. A paid the PG fee to XYZ PG on 1 April and 1 May 2026. However, on 1 June 2026, Mr. A decided to vacate the PG due to personal reasons. The question that arises is: when does the liability to pay GST arise in this case?

In the above scenario, the PG accommodation services may become taxable since the minimum continuous stay of 90 days is ultimately not fulfilled.

Let us now examine when the GST liability arises. On 1 April and 1 May 2026, when Mr. A made the payments to XYZ PG, GST was not charged, as Mr. A had expressed his intention to stay for a period exceeding 90 days. Accordingly, XYZ PG treated the accommodation services as exempt.

However, on 1 June 2026, Mr. A decided to vacate the PG, resulting in the period of stay being less than 90 days. Consequently, the exemption may no longer be available and the supply may become liable to GST.

If the exemption is held to be unavailable, the time of supply would have to be determined in accordance with the applicable provisions of Section 13 of the CGST Act, 2017. Accordingly, where the relevant payment was received on 1 April and 1 May 2026, the time of supply may be determined with reference to those dates, subject to the applicable provisions.

On this basis, XYZ PG may be required to discharge GST on the accommodation services provided to Mr. A for April and May 2026. The question that then arises is whether interest under Section 50 of the CGST Act would also be payable.

There are two possible views regarding the applicability of interest in such a situation.

View 1 – Interest is payable:

If the exemption is considered to have been unavailable from the relevant time of supply, the GST liability would have arisen with reference to the relevant time of supply in April and May 2026. Since the tax was not discharged at that time, the tax authorities may contend that interest under Section 50 is payable for the period of delay.

View 2 – Interest is not payable:

There is, however, an alternative view regarding the applicability of interest. Interest is generally compensatory in nature and arises where tax, which is due and payable, is not discharged within the prescribed time[1]. In the present case, during April and May 2026, XYZ PG had treated the supply as exempt based on the agreed period of stay exceeding 90 days. Therefore, it may be contended that there was no tax liability considered to be due and payable during those months.

On this view, the requirement to pay GST arises only when it becomes apparent that the minimum continuous stay of 90 days would not be fulfilled, i.e., when Mr. A decides to vacate the PG on 1 June 2026. If the tax liability is discharged in June 2026 itself, there would be a strong basis to contend that interest under Section 50 is not payable.

Accordingly, the applicability of interest in such circumstances is a matter of interpretation and may depend upon whether the 90-day condition is considered with reference to the agreed period of stay or the actual period of stay and the point at which the tax liability is considered to have arisen.

GST Treatment of Food, Ancillary Services and ITC

7. Is GST applicable where food is included in the PG accommodation charges?

Ans: – Supply of food is generally taxable under GST. However, in case of PG accommodation services along with accommodation food, housekeeping, Wi-Fi and etc are usually provided as ancillary services. As all these services are naturally bundled in the ordinary course of business, this will be considered as composite supplies, with PG accommodation being the principal supply. As the principal supply is exempted all these ancillary supplies are also exempted and GST would not be applicable.

8. Is a person providing PG accommodation services eligible to avail Input Tax Credit (ITC)?

Ans:- When the outward supplies are exempted, ITC cannot be availed on the said inward services as the same are exclusively used in providing exempted services. However, if the PG service provider is providing both taxable as well as exempted services, In such scenario inputs relating exclusively to taxable supply, ITC can be fully availed and on inputs used both for taxable as well as exempted supplies ITC can be availed proportionately as per rule 42 and 43 of the CGST Rules, 2017.

PG Accommodation as a Residential Dwelling

9. Can a PG accommodation be treated as a residential dwelling?

Ans: – The term “residential dwelling” is no where defined in the CGST Act, 2017.

However, the Hon’ble Supreme Court in the case of The State of Karnataka & Anr. Versus Taghar Vasudeva Ambrish & Anr – 2025 (12) TMI 505 – Supreme Court held that

“residential dwelling” means any building, structure, or part of the building or structure other than offices or factories, that is used or intended to be used as a home, residence, or sleeping place by one person or by two or more persons maintaining a common household, to the exclusion of all others

Hostels used for residential purpose by the students and working women is covered under residential dwelling[2].

Thus, from the above it is clear that hostels can be called as residential dwelling.

GST on Building Leased by a PG Operator

10. A PG operator has taken a building on lease to provide PG accommodation services to students and working professionals. Is GST applicable on the lease of the building?

Ans: – Let us understand this with an example

Mr. A is a building owner

XYZ PG accommodation is a PG owner

Mr. A is providing his building on rent to XYZ PG and XYZ PG in turn is providing accommodation services to students, working professionals and etc.

As per entry 12 of Notification no 12/2017 dt. 28.06.2017 Services by way of renting of residential dwelling for use a residence is exempted from GST.

To get covered under the above exemption entry two conditions should be satisfied

i. Rending should be of residential dwelling and

ii. It should be used as residence.

As discussed above PG accommodation/hostels is a residential dwelling, so the first condition got satisfied. Let us now analyse whether the said residential dwelling is being used for residential purpose or not.

Residence means a place where a person eats, drink and sleeps at that place and not necessary that he should own it[3].

Also, the Hon’ble Bombay High Court[4] held that hostel is nothing but a house of residence or lodging for students. As the residential dwelling is being used by students or working professionals for residence it is satisfying all the conditions stated above and getting covered under the said exemption entry. However, if the PG services provider is a registered person under GST, the said exemption would not be available.

Further, a question can still be there that the lessee i.e., XYZ PG operator is not using as residence. In the instant as the residential dwelling is ultimately being used for residential purpose, the said transaction is rightly eligible for exemption[5].

Composition Scheme for PG Service Providers

11. Can a PG service provider opt for composition scheme?

Ans :- Yes, a PG service provider can opt for composition scheme if their turnover in the preceding financial year did not exceed 50 lakhs rupees. However, one important point to be noted in this scenario was, if a PG accommodation service provider opts for compsotion scheme GST has to be discharged @ 6% even on the exempted supplies as tax should be calculated on the turnover in a state[6] (which also includes exempted supply).

I would like to thank my dear friends CA Vinay Kumar. J, Deputy Manager, HNA & Co LLP for his valuable inputs and reviewing this article and CA Divya Bala Vundipalli, Deputy Manager, HNA & Co LLP for her continuous support.

******

Disclaimer:

The views expressed in this article are personal to the authors and are an attempt to interpret the nascent GST law. We recommend professional assistance where required.

Suggestions or feedback can be sent on [[email protected]](mailto:[email protected])

[1] M/s. Pratibha Processors v. Union of India, 1996 (88) E.L.T. 12 (S.C.).

[2] Mohinder Singh vs State of Haryana and Commissioner of Central excise vs Allied Air Conditioning Corpn – SC

[3] Sri Sri Sri Kishore Chandra Singh Deo vs Babu Ganesh Prasad Bhagat and others – SC

[4] Bandu Ravji Nikam – [2002 (9) TMI 897 – BOMBAY HIGH COURT]

[5] The State of Karnataka & anrs vs Taghar Vasudeva Ambarish & anr – 2025 (12) TMI 505 – Supreme Court

[6] As per Section 2(112) of the CGST Act, 2017.