Under the current GST framework in India, paying guests (PGs) and hostel accommodations have been brought squarely under the tax net. Before July 2022, there was an exemption for stays priced below ₹1,000 per day, meaning budget accommodations were not liable to GST. However, this exemption was removed in mid-2022, and since then, all such services have been taxed at a flat rate of 12% regardless of the daily tariff. This was a significant shift for students, working professionals, and budget travelers, as even low-cost accommodations suddenly became more expensive due to the added tax burden.
Recognizing the impact on long-term residents, the government introduced a new relief measure from 15 July 2024 under entry 12AA of Notification No. 12/2017-CT(R). As per this provision, if a person stays for at least 90 consecutive days and the cost does not exceed ₹20,000 per month per individual, the accommodation is exempt from GST. However, this exemption is not automatic — the occupant must provide sufficient proof of stay duration and charges. Shorter stays or higher monthly rates remain taxable at 12%, in line with earlier legal interpretations such as the karnataka AAR’s ruling that PGs and hostels are not “residential dwellings” for GST purposes.
In practice, many tenants have reported discrepancies in how PGs and hostels handle GST. Some operators levy GST even when exemptions could apply, while others demand cash-only payments to avoid issuing invoices altogether. If a PG is GST-registered, it is legally required to collect the tax, issue proper tax invoices, and remit the amount to the government. Cash-only demands can be a red flag, potentially indicating tax evasion and unreported income. For tenants, ensuring transparent billing not only safeguards their rights but also helps them avail lawful exemptions where applicable.
Recognizing the impact on long-term residents, the government introduced a new relief measure from 15 July 2024 under entry 12AA of Notification No. 12/2017-CT(R). As per this provision, if a person stays for at least 90 consecutive days and the cost does not exceed ₹20,000 per month per individual, the accommodation is exempt from GST. However, this exemption is not automatic — the occupant must provide sufficient proof of stay duration and charges. Shorter stays or higher monthly rates remain taxable at 12%, in line with earlier legal interpretations such as the karnataka AAR’s ruling that PGs and hostels are not “residential dwellings” for GST purposes.
In practice, many tenants have reported discrepancies in how PGs and hostels handle GST. Some operators levy GST even when exemptions could apply, while others demand cash-only payments to avoid issuing invoices altogether. If a PG is GST-registered, it is legally required to collect the tax, issue proper tax invoices, and remit the amount to the government. Cash-only demands can be a red flag, potentially indicating tax evasion and unreported income. For tenants, ensuring transparent billing not only safeguards their rights but also helps them avail lawful exemptions where applicable.
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