GST on Hostel and PG Services: Applicability, Rates and Exemptions

GST on hostel and PG services clearly draws a line between necessary housing (like for students and long-term working professionals) and commercial stays. Major changes have been made to the Goods and Services Tax (GST) regulations regarding hostels and paying guest accommodations in India. This article deep-dives into taxation under GST law and how GST affects these services.

GST Applicability Criteria for Hostel and PG Accommodation

A few important factors determine the GST on PG and hostel services: 
1. Service Type: Long-term residential lodging is handled differently than hotels and other short-term commercial stays. 
2. Number of Days of Stay: If the stay is 90 days or longer and the monthly rent is ₹20,000 or less per person, GST is not applicable. 
3. Who is the Service Provider: Irrespective of rent or the duration of stay, GST is not applicable if an educational institution offers accommodation directly to its students.

GST Rates on Hostel and PG Services

These rules aim to keep essential housing for students and workers tax-free, while applying tax to luxury or short-term stays.

Special Cases and Exemptions

1. Educational Institutions: Colleges, universities, and schools which accommodate their own students are exempt from GST altogether. 
2. Bundled Services: Depending on what is deemed to be the primary service (typically rent), GST may be applied if rent is combined with food, laundry, or other services. 
3. Women's Hostels: No special exemption applies. All hostels, including those for women, are subject to the same regulations. 
4. Reverse Charge Mechanism (RCM): In some circumstances, the recipient may be required to pay GST under RCM if a hostel or accommodation is rented by a business that is registered for GST.

Important Change After July 18, 2022

• What was altered:

Earlier, GST did not apply to hotel rooms that cost ₹1,000 per day or less. However, this exemption was removed on July 18th, 2022. Even if the rate is less than ₹1,000 per day, all hotel accommodations, irrespective of price, are now subject to 12% GST.

• What did not change:

Hostels and PGs that offer extended stays of more than ninety days to B2C clients, like students, freshers, or working professionals, are still exempt from GST. GST is not applicable if a person is renting a PG or hostel room for three months or more and the monthly rent is within the limit, which is currently ₹20,000 per person.