MUMBAI: The GST Council in their recent meeting has recommended an exemption for hostel services if the monthly charges per person are less than Rs 20,000, but only in those cases where the services are provided continuously for a period of 90 days.
CNK & Associates, a firm of chartered accountants, remarks that Goods and Services Tax (GST) on hostel services provided to students, working professionals, etc has been one of the most disputed subjects.While judgements in favour of taxpayers were rendered by the Karnataka High Court and the Madras high court, notices continued to be issued to the taxpayers.
This exemption provides clarity and relief to the hostel owners as well as the users of hostels. The press release also suggests that similar benefits will be extended to past cases. This will address past litigations on this subject matter.
The exemption will be applicable only when the stay is for more than 90 days. If the occupant vacates the hostel before the expiry of this period, GST will be applicable.
Tax experts point out that earlier, hostel accommodation tariff that was below Rs 1,000 per day was exempt from GST for a certain period and only up to July 17, 2022. This led the Authority for Advance Ruling in many cases to hold that hostel rent would be subject to GST at 12%.
There is no GST levy if a ‘residential dwelling’ is rented for ‘the purpose of residence’ to GST-unregistered individuals (eg: Salaried individuals, students, small businessmen who are not required to register for GST etc). However, the AAR benches distinguished a residential dwelling which is meant for permanent stay from a hostel. The recommendation by the GST Council will greatly benefit students and working professionals who reside in hostels.