If you operate a hostel, get ready to pay a 12% Goods and Services Tax (GST).
The GST-Authority for Advance Ruling (AAR) has recently clarified its stance on two separate cases, stating that hostel rent does not qualify for GST exemption as it is not considered a ‘residential dwelling.
‘ Additionally, the regulatory body has specified that until July 17, 2022, hostels charging rent below Rs 1000 per day are exempt from GST.
‘Sri Sai Luxurious Stay’ Petitions for GST Exemption
Based on a report by the Times of India, ‘Sri Sai Luxurious Stay,’ an organization based in Bangalore, offers paying guest accommodations to people.
The organization filed a petition, arguing that private hostels receive exemptions as ‘residential dwellings,’ and thus, they should also be eligible for similar treatment.
A similar petition was filed by the VS Institute and Hostels of Noida.
These organizations maintained that since they provide essential amenities like water, electricity, and Wi-Fi, they should be exempted under the ‘residential dwelling’ category.
AAR’s Stand on the Matter
In response to the aforementioned cases, the GST-Authority for Advance Ruling (AAR) clarified its position.
According to AAR, if a property is used as a permanent residence, no GST is applicable.
However, the institution emphasized that ‘residential dwelling’ refers to a permanent residence and not guest houses or lodges.
The Karnataka High Court also weighed in on the matter, stating that charging money for a bed in a single room without individual kitchen facilities does not qualify as a residential dwelling under GST regulations.