Mumbai, July 29: The Authority for Advance Rulings (AAR) in Karnataka has ruled that rent paid for accommodations such as paying guest (PG) facilities and hostels, which are not considered residential dwellings, will be subject to a 12 percent goods and services tax (GST). During the hearing of Srisai Luxurious Stay LLP's case, the AAR clarified that only the rent paid for residential dwellings would be eligible for GST exemption. Other accommodations, such as paying guest (PG) facilities and hostels, would not qualify for this exemption.

Prior to July 13, 2002, both residential dwellings and accommodations like hotels, inns, or guest houses with a daily rent of up to Rs 1,000 were exempt from Goods and Services Tax (GST). However, on July 13, 2002, the government issued a notification to revoke the GST exemption for hotels and guest houses where the rent is up to Rs 1,000 a day. This change in taxation was implemented and became effective on July 18 of the same year. GST Council Likely To Exempt IGST on Cancer Drug Import, Fix 5% Tax on Refreshments Served in Multiplex.

Upon examination, the authority noted that the applicant's practice involves renting a residential dwelling and subsequently dividing it into partitions with arranged cots that are rented out based on the number of occupants sharing a room. The AAR determined that such an arrangement does not qualify as a residential dwelling, as it consists of rooms shared by unrelated individuals. Public Health Groups Urge GST Council To Raise Compensation Cess on Tobacco Products.

The applicant acknowledged that the accommodation they provide does not include individual kitchen facilities for each inhabitant, and cooking is also prohibited on the premises. The AAR noted that these aspects are not essential characteristics of a place intended for a permanent stay. Experts speculate that if other PG and hostel owners follow the AAR's ruling and do not offer individual cooking facilities while providing shared accommodations to unrelated individuals, they may be liable to pay 12 percent GST. This implication could apply to other states as well if they abide by the same ruling.

(The above story first appeared on LatestLY on Jul 29, 2023 11:03 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).