According to CNK & Associates, a firm of chartered accountants, GST on hostel services for students, working professionals, and others has been a contentious issue. Although the Karnataka High Court and the Madras High Court have ruled in favor of taxpayers, notices were still being issued.
This new exemption brings much-needed clarity and relief to both hostel owners and residents. The press release also hints that similar benefits will be extended to past cases, addressing previous litigations on this matter.
The exemption applies only if the stay exceeds 90 days. If a resident leaves the hostel before this period ends, GST will still apply.
Tax experts note that previously, hostel accommodation tariffs below Rs 1,000 per day were exempt from GST until July 17, 2022. This led the Authority for Advance Ruling (AAR) to rule that hostel rent would be subject to 12% GST in many cases.
There is no GST if a ‘residential dwelling’ is rented for residential purposes to GST-unregistered individuals (like salaried employees, students, and small business owners not required to register for GST). However, the AAR benches distinguished between permanent residential dwellings and hostels. The GST Council’s recommendation will greatly benefit students and working professionals living in hostels.
This update is a significant step towards resolving long-standing disputes and providing financial relief to many. It’s a win-win for both hostel providers and their residents.