Living in PG hostel will cost you more with 12 % GST on rent paid

AAR in Bengaluru ruled that Paying Guest (PG) hostels could not be considered residential units and hence not exempted from GST

Living in PG hostel will cost you more with 12 % GST on rent paid

HYDERABAD: With the Authority for Advance Ruling (AAR) in Bengaluru on July 13, 2023, ruling that Paying Guest (PG) hostels could not be considered as residential dwelling units and hence not exempted from GST, people living in these hostels would have to shell out 12 percent extra over and above the room rent.

This would be in addition to the 18 percent charged for the services provided by the hostels such as washing and cleaning.

The AAR responding to an advance ruling request by Srisai Luxurious Stay Hostel, Bengaluru made it clear that PG hostels could not be considered as residential dwelling units and would attract 12 percent GST.

Vellampalli Mahidhar, Treasurer of IT Corridor Hostels Association, Hyderabad a group of over 3,500 hostel owners, expressed dismay over the AAR ruling on PG hostels. Speaking to NewsTAP on Monday, he pointed out that they would consider appealing to the Appellate Authority for Advance Ruling (AAAR), as the final bill would have to be paid by the youngsters who try hard to survive in big cities such as New Delhi, Mumbai, Pune, Bengaluru and Hyderabad.

“If we could convince the GST authorities that the PG accommodation which they consider as a commercial activity, is actually a home away from home for the people who live in them there could be a chance of reduction in the tax,”

He explained that already skyrocketing real estate prices in IT corridors of all major cities, the hostel owners were forced to hike the room rents knowing very well that the entry-level salary for a youngster would be around a meagre Rs 20,000 to Rs 25,000.

“The average room rent is around Rs 6,000 and after the addition of GST it would be Rs 6,720, putting extreme pressure on people coming to Hyderabad from districts across the Telugu States,” Mahidhar added.

Ravinder Mandadi of Amigos Luxury Mens PG Hostel in Kondapur said that he would pass the additional financial burden on to the customer. “Just like the hotel bill with GST is paid by the customer, the tenants would have to shell down the 12 percent GST,” he reasoned.

He said that hostel owners offer hassle-free living to the tenants by taking care of food, cleaning and washing. “If they rent an apartment, they will have to do all these things on their own. We are more like a home to them,” he argued negating the AAR’s ruling.

Hostel owners who bore the brunt during the pandemic said that they have already increased the rents by 10 percent post-pandemic and they might not be able to increase rents one more time.

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