Hostels Are Not Residential Dwelling Units, No GST Exemption: Karnataka AAR

The Karnataka Authority of Advance Ruling (AAR) has held that PG/Hostel Rent paid by inhabitants does not qualify for GST exemption as the services are not akin to renting a residential dwelling for use as a residence.

The bench of M.P. Ravi Prasad and Kiran Reddy T. has observed that GST on reverse charge will be applicable on the rental to be paid to the landowners.

The applicant is an LLP and is in the business of providing PG/hostel services, which refer to paying guest accommodation or hostel services and are akin to guest house and lodging services.

The applicant sought an advance ruling on the issue of whether PG or Hostel Rent paid by inhabitants qualifies for GST exemption since they are used as residential dwellings.

Yet another issue raised was whether the charges collected towards allied additional services provided by the LLP would be considered a bundled service along with the service of providing a Hostel or Paying guests.

The AAR held that a residential dwelling is a residential accommodation meant for a permanent stay and does not include a guest house, lodge, or similar places.

The AAR stated that accommodation services offered by hotels, clubs, campsites, etc., with charges up to Rs 1,000 per day, were eligible for GST exemption until July 17, 2022.

The AAR held that the allied additional services provided by the LLP are not naturally bundled with the applicant's hostel or paying guest accommodation service.

Applicant’s Name: Srisai Luxurious Stay LLP

Date: 13/07/2023

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