PG and hostels in Bengaluru will get costlier; Here's why

By Vinaykumar Patil | First Published Aug 2, 2023, 3:15 PM IST

The Authority of Advance Rulings (AAR) has ordered PGs and hostels in Bengaluru to collect 12% GST on rent as they are categorized as a service, not residential units. This decision can burden students and employees, leading to increased accommodation costs. Additional services also attract 18% GST.

Paying Guests (PG) and hostel accommodation in Bengaluru will get costlier for the students, as the Authority of Advance Rulings (AAR) has ordered the owners to collect 12% GST on rent. The Bengaluru bench of AAR stated that the PGs and Hostels are not residential dwelling units and are categorised as a service, hence they attract GST.

The GST law is not applicable to residential units, thus making rental houses an exemption. Meanwhile, the PGs and Hostels cannot be considered as residential units therefore, GST cannot be exempted on these properties. The accommodation in PGs and Hostels are provided as a service and the additional items like TV, refrigerators and washing machines are taxable.

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This decision of AAR was ruled out as a response to a query by Srisai Luxurious Stay LLP, Bengaluru. It also stated that the accommodation with charges less than 1,000/day in Hotels, Campsites, Resorts etc was exempted from GST until July 17, 2022. As the date has lapsed GST is now applicable, added AAR.

This order can be a burden on the Students as well as Employees who stay in PG’s Hostels etc, and the accommodation costs can be increased from now on. The room rents in Bengaluru are already increasing for the employees are being called back to work from offices in Bengaluru. This order imposes a cess on the rent as well.

The spokesperson of Srisai Luxurious Stay spoke to a website and stated that PGs and Hostels are not paying GST as of now, and cannot dare to increase the rental prices, as the students will be burdened. Therefore, until a few months, PG should bear the losses and think about a slow increase in rent.

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A student living in PG of Koramangala stated that the rents are already high and they cannot afford cess on the rent. The day-to-day expenses in Bengaluru have been increased from Aug.1 as the Congress government has hiked excise duty, milk price and even the food items in the hotel. Students will be directly affected as they get pocket money from the family.

The AAR also ruled out a decision stating that the additional services in the PGs and Hostels attract 18% GST, including 12% on the rent. Meanwhile, experts state that the rule can be challenged as the AAR is obtuse in their decisions.

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