Students living in hostels and those in PG accommodation have to shell out more as the Authority for Advance Ruling has stated that the rentals would attract 12 per cent GST and services such as the use of washing machines, meals and television will attract an 18 per cent tax.
The ruling is set for a legal challenge as tax experts feel the AAR has adopted an unreasonable and obtuse view, contrary to the settled high court decisions that they are residential units.
Ranjeet Mahtani, partner, Dhruva Advisors, said: “The views expressed by the UP and Karnataka benches of the AAR are obtuse and can be challenged.
“As for bundling of other supplies (washing machine, TV set) these help establish the residential nature of the building and, ideally, deserve to be bundled with the principal supply (of residential dwelling) and not be taxed.”
In an advance Ruling sought by Srisai Luxurious Stay LLP, the AAR said GST exemption was applicable on the accommodation services of up to Rs 1,000 per day, provided by hotels, clubs and campsites till July 17, 2022.
“PG/hostel rent paid by inhabitants do not qualify for GST exemption… as the services provided by the applicant are not akin to renting of residential dwelling for use as a residence,” the Bangalore bench said.
The bench said: “The charges collected towards allied additional services provided by the LLP would not be considered as a naturally bundled service along with the service of providing Hostel/paying guest accommodation. These services are treated as separate and distinct supplies for GST purposes.”
In a similar reference by Noida-based V.S. Institute & Hostel, the Lucknow bench of the AAR said GST would apply on hostel rooms costing less than Rs 1,000 per day.
“The Karnataka AAR went on to hold that the accommodation provided was a room and people shared the same room with no individual kitchen facility and hence do not fall within the meaning of residential dwelling.
“Further washing machine facility, TV etc will not be bundled services and hence taxable separately. These rulings will increase the cost for students staying in hostels. The implication of these rulings will be GST at 12 per cent on room rent and 18 per cent on other services,” Ved Jain, former president of ICAI, said.
