Detailed Analysis of GST on Paying Guest (PG) Accommodation

The Goods and Services Tax (GST) framework for Paying Guest (PG) accommodations and similar lodging services in India has undergone several amendments. Here is a comprehensive analysis, covering applicable rates, conditions, exemptions, and notifications.

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1. GST Applicability (GST on PG Accomodation)

PG accommodations, hostels, and similar establishments providing housing to students, working professionals, and others are classified under Service Accounting Code (SAC) 9963, which pertains to “Accommodation, Food, and Beverage Services.” Effective July 15, 2024, under Notification No. 12/2017-CT(R) (as amended by Notification No. 4/2024-CT(R)), GST is applied based on specific criteria:

• 12% GST applies to services that charge above ₹20,000 per person per month or provide short-term accommodation (less than 90 days).
• Long-term accommodations (90+ days) with charges ≤ ₹20,000/month per person are exempt.
• Additional services such as meals, internet, or cleaning are considered composite supplies, and if the combined cost exceeds ₹20,000, GST is applicable

2. Exemptions and Conditions 

• Accommodations rented exclusively for residential use qualify for GST exemptions under Entry 12AA of Notification No. 12/2017-CT(R).
• Hostels catering to students or professionals for stays over 90 days are exempt, provided monthly charges remain below the threshold.
• Short-term or mixed-use facilities (e.g., commercial and residential) attract GST at 12%

3. Notifications and Amendments

• Notification No. 12/2017-CT(R) introduced GST rules for residential and non-residential properties.
• Amended by Notification No. 4/2024-CT(R), effective July 15, 2024, Entry 12AA clarified that hostels, PG accommodations, and camps fall outside the exemption for “residential dwellings” unless they meet specific criteria

Table Summary of GST Applicability

4. Implications for Stakeholders

• For Consumers: Students and working professionals benefit from exemptions on long-term stays but may face higher costs for short-term accommodations. Transparency ensures fair billing.
• For Operators: PG owners must ensure compliance with classification and exemptions. GST registration allows claiming Input Tax Credit (ITC) for maintenance and operational costs
• Market Impact: Formalization under GST reduces unregistered operations, ensuring safety, quality, and tax compliance. It also incentivizes foreign and corporate investments in the sector

5. Additional Clarifications

• Hostels vs. Residential Dwellings: Accommodations such as hostels and PGs are categorized separately from “residential dwellings” unless they exclusively serve residential purposes
• Composite Supplies: When bundled services (e.g., food or utilities) exceed ₹20,000, the entire service is taxable under GST on PG Accomodation

This comprehensive GST framework aims to balance regulatory compliance with sectoral growth. Operators and tenants are encouraged to review legal notifications and rulings for accurate compliance. For further details, refer to the CBIC Guidelines or consult tax professionals