Rent paid for hostel accommodations and by paying guests will attract 12% goods and services tax (GST), the Authority for Advance Rulings (AAR) in Karnataka said on Friday. In two separate case orders, the GST-AAR said the hostel rent paid by inhabitants does not qualify for GST exemption as it is not a ‘residential dwelling’.

The AAR, while hearing a case of Karnataka-based Srisai Luxurious Stay LLP, said that only rent for residential dwellings would qualify for GST exemption. Srisai had filed an application before the AAR and argued that since rent on these places is like that for residential dwellings, there should be no GST on it.

There is no GST on residential dwellings. Besides, hotels, inns, or guest houses where the rent is up to Rs 1,000 a day were also exempted. In a notification issued in July 2022, the government ordered to lift the GST exemption for hotels and guest houses, where rent is up to Rs 1,000 a day. The notification was effective from July 18 of that year.

The AAR said that the hostel accommodation tariff below Rs 1,000 per day was only exempted from GST for a certain period and till July 17, 2022.