The GST Council has proposed a measure to offer relief to students and working professionals by suggesting an exemption for accommodation services with a value of supply up to Rs.20,000 per person per month from the goods and services tax.
The recent notification has been well-received by co-living space providers as it provides clarity regarding the exemption of GST for hostels and accommodations catering to working professionals, subject to specific limits.
The GST Council stated that these services are specifically designed for students or individuals in the working class, and exemption can only be obtained if the duration of stay does not exceed 90 days.
In an official statement, the government said, "In order to establish an independent provision in notification No. 12/2017- CTR 28.06.2017 categorized under 9963 to provide exemption for accommodation services with a supply value of accommodation up to Rs. 20,000/- per month per individual, on the condition that the accommodation service is provided for a minimum continuous duration of 90 days. This benefit will also be applicable to previous instances."
The co-founder, CRIB, a Bengaluru-based proptech start-up, Sunny Garg said that, the recommendation made by the GST council to exclude GST on accommodation services with monthly charges of up to Rs.20,000 per person is a favorable step. This will be advantageous for a significant number of co-living companies, particularly those operating in the student housing sector, where monthly fees typically fall below this threshold throughout the country.
Furthermore, the criteria for eligibility, which mandates that the accommodation service must be provided for a minimum uninterrupted period of 90 days, can be readily satisfied when it comes to student co-living arrangements and hostels, as they typically offer longer lease or stay durations.
Tax professionals emphasize that at present, the provision of renting a residential property to an unregistered individual for residential purposes is exempt from GST. It is important to note that a residential property typically does not encompass a hostel.
As per the resolution passed by the 53rd GST Council, any hostel services utilized for a continuous stay exceeding 90 days, including private hostels, will be exempted from taxation if their monthly charges do not exceed Rs.20,000.
In July 2023, the Bengaluru Authority for Advance Ruling determined that paying guest accommodations and hostels are subject to a 12% GST. This decision equates the PG/hostel industry with the hospitality sector, as these accommodations are not considered permanent residences.
The Bengaluru bench further emphasized that services such as TV or washing machine will not be considered as bundled services, thus requiring separate GST charges. Similarly, the Lucknow AAR bench ruled that GST will be levied on hostel rooms priced below Rs.1,000 per day in a case involving VS Institute and Hostel based in Noida.
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