12% GST slapped on PG rentals, hostel fees in Karnataka
BENGALURU: People staying in paying guest (PGs) accommodations and hostels may soon have to shell out more as 12 per cent GST will be slapped on rent paid for such accommodations and other services separately.
The Authority for Advance Ruling (AAR) in Bengaluru ruled on July 13 that hostels are not residential dwelling units and are not exempt from GST. In an advance ruling sought by Srisai Luxurious Stay LLP, AAR said GST exemption was applicable to accommodation services of charges up to Rs 1,000 per day, provided by hotels, clubs, campsites etc. till July 17, 2022.
“GST on reverse charge will be applicable on the rental to be paid to the landowners by the applicant as the services of the applicant are leviable to GST and thus the applicant has to obtain GST registration,” it added. The Bengaluru bench also stated that other services like TV, or washing machine will not be bundled services and hence GST will be charged separately on them. In a similar case by Noida-based VS Institute and Hostel, the Lucknow AAR bench said GST will be applicable on hostel rooms costing less than Rs 1,000 per day.
Sampath Althur, president, of Bengaluru PG Owners Association, said, “It is unfair to allow GST to be made applicable on rental housing as the effect of increased cost of rent will trickle down to students and other migrants residing in the city.
New levy to burden migrants
A PG or a hostel comes under the ambit of affordable housing and is not a commercial business.” Even 12 per cent GST will be Rs 1,000 extra per month and will be a burden on a person, especially a student. There needs to be clarity on affordable housing and the definition of ‘residential dwelling’ as it is unfair to levy GST on many tenants sharing a house.
Many people from tier 2 and tier 3 cities come to Bengaluru for work or studies. The new levy will financially burden them, he added. People are already complaining about the high cost of living in the city and this will only make it worse, citizens said.
Supriya Mehta, a professional residing at a PG in Ejipura, said, “PGs in Bengaluru are already quite expensive. I pay Rs 10,000 for a double-sharing room. If taxes are levied on the PGs and coliving spaces, they will become unaffordable to certain groups of people.
Students surviving on pocket money and low-salaried employees will find it difficult to manage their expenses if they have to spend a lot of money on rent.” However, small business operators and big commercial players don’t have to panic but should ensure that the industry is ready to accept it if it becomes mainstream.
Though owners with an annual turnover of less than Rs 20 lakh are not obliged to sign up for GST. Even if their revenues are higher they can consider re-looking at positioning their services to reduce the overhead of GST, experts suggested.