The Authority of Advance Ruling (AAR), Karnataka has held that 12% GST is applicable on Hostels/PGs.
BACKGROUND
The applicant is the LLP who has been employed with the main objective to carry on, within India, the business of developing, running, maintaining, operating, setting up, owning, dealing in buying, selling, renting, subletting and managing paying guest accommodations, service apartments, flats aimed to suit all types of customers by whatever name called.
ISSUES RAISED
Whether PG or Hostel Rent paid by inhabitants qualifies for GST exemption since they are used as residential dwellings.
Whether the charges collected towards allied additional services provided by the LLP would be considered as a bundled service along with the service of providing of Hostel/Paying guest?
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 guest.
RULING
The AAR 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 AAR stated the allied additional services provided by the LLP are not naturally bundled services with the applicant’s Hostel/Paying guest accommodation service. 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.
The AAR noted that 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.
Case Title: Srisai Luxurious Stay LLP