GST applicability on PG's - M/S Srisai Luxurious Stay LLP

May 8, 20202 min read

Author’s Message

Services of PG’s and hostels are very famous. This Advance Ruling will clear the picture of GST application on such services. The concept of Declared Tariff was subsequently removed from the provisions of GST for Hotel industry but this advance ruling will help you to understand the impact of declared tariff and how the contracts are to be separated in case of accommodation services.

Facts of the case

M/S Srisai Luxurious Stay LLP is engaged in the business of developing, running, maintaining, operating setting up, owning dealing in, buying, selling, renting, subletting and managing paying guest accommodations, service apartments, flats aimed to suit up all types of customers by whatever name called. The applicant is specifically focused on provisions of Boarding and lodging facilities both on monthly and daily tariffs for inhabitants and also ancillary services like meals, security guards, furniture, Housekeeping etc.

Questions Involved

1. Whether the daily accommodation services ranging from Rs 300-500 per bed are eligible for exemption under notification no 12/2017 -central tax?

2. Whether the monthly accommodation services ranging from Rs 6900-12500 per bed is eligible for exemption under notification 12/2017-Central tax?

3. Whether the said notification would be applicable if LLP decides to charge for extra facilities that are currently included in the tariff received by the inhabitants but the overall price would be less than the present exemption limit of Rs1000 per day per unit?

Findings and Rulings

It was held by the authority that the term Hotel accommodation is defined in notification 11/2017-Central Tax (Rate) dated 28.06.2017 which states that “Hotel Accommodation means supply by way of accommodation in hotels, inn, guest house, clubs, campsites, or other commercial places meant for residential or lodging purpose including the supply of time share usage rights by way of accommodation”. Hence, it is clear from above wordings that supply of accommodation services on daily basis and monthly basis by the applicant will be covered by SAC 996311 or 996322 which relates to supply of services of Hotels, Inn, guest house etc. Further as per notification 11/2017 supply of hotel accommodation having room tariff above one thousand and less than equal to seventy five hundred per unit per day shall be charged @ 12% and as per notification 12/2017 such services having room tariff below one thousand will be exempted. However, if the applicant is engaged in making other supplies along with accommodation services like meals, housekeeping, security guard etc and the proposed tariff includes the amount of such ancillary supplies then also he is eligible for exemption under notification 12/2017 as the principal supply is accommodation services. Further if the proposed tariff does not include the amount of such ancillary services and are charged in addition to the accommodation services then it would be considered as a separate contract as these services are independent of the accommodation services provided. Therefore, even if the total charges charged by the applicant is less than 1000 per unit per day but the ancillary services do not form part of proposed room tariff, then the amount charged for those ancillary services shall be taxable under this act.