Hostels and PG accommodation services attract @ 12% GST

In re Srisai Luxurious Stay LLP (GST AAR Karnataka)

The AAR, Karnataka, in the case of Srisai Luxurious Stay LLP [Ruling No. KAR ADRG 25/2023 dated JULY 13, 2023] ruled that hostel and PG accommodation cannot be considered equivalent to residential accommodation and thus such services are not eligible for exemption and accordingly are exigible to GST @12%.

Facts:

M/s. Srisai Luxurious Stay LLP (“the Applicant”) was engaged in the business of developing, running, subletting, and managing paying guest accommodation, service apartments, flats and is also providing additional services like meals, furnished rooms, security, housekeeping, washing machine facilities, television in each room, internet access, and vehicle parking to the paying guests.

The Applicant was of the view that since private hostel are covered under the category of residential dwelling and thus such services are covered under exemption entry No. 12 of Notification No. 12/2017 Central Tax (Rate) dated June 28, 2017 (“the Service Exemption Notification”) which inter alia coves ‘services by way of renting of residential dwelling for use as residence except where the residential dwelling is rented to a registered person’.

Issues:                                                                                                                                         

• Whether PG/Hostel used as residential dwelling by inhabitants qualify for GST exemption?
• Whether charges towards allied services would be considered as an ancillary services of hostel/paying services?
• Whether GST on reverse charge will be applicable on the rental to be paid to the landowners?

Held:

The AAR, Karnataka [Ruling No. KAR ADRG 25/2023 dated JULY 13, 2023] held as under: