Order Date – 13 July 2023

Facts – 

• The Applicant, M/s. Srisai Luxurious Stay LLP, are into the business of developing, running, subletting and managing paying guest accommodation, service apartments, dats aimed to suit all types of customers by whatever name called.
• The applicant LLP has specifically focused on provision of Boarding and Lodging facilities to the inhabitants and also ancillary services to the inhabitants like Meals which includes Breakfast, Lunch and Dinner, Fully furnished rooms, Round the clock security guards at the premises, House Keeping facilities etc.

Issue – 

• Whether the PG/Hostel Rent paid by inhabitants qualify for GST exemption since they are used as residential dwelling?

Order – 

• The AAR observed that Education guide on Taxation of services explained residential dwelling as a residential accommodation meant for permanent stay and does not include guest house, lodge or like places. In the instant case, the applicant in his own admission claims to be providing PG/hostel services which inter alia refer to ’paying guest accommodation/hostel’ services and are akin to guest house and lodging services and therefore can’t be termed as 'residential dwelling’.
• It is apparent that the accommodation provided to the inhabitant is not a residential dwelling but a room; un-related people share the said room and invoices are raised per bed on monthly basis are not characteristic of a residential dwelling. It thus appears that the applicant is not providing service of renting of residential dwelling.
• Thus the services being provided by  the applicant do not qualify for exemption under SI No. 12 of Notification No. 12/ 20 17- Central Tax (Rate) dated 28.06.2017, as amended.
• It is evident from the nature of the additional services that they are optional and all inhabitants may not opt for the said services. An inhabitant without a vehicle does not require vehicle parking facility; some of the inhabitants may not opt for food i.e. breakfast etc., washing machine facility, television etc. Thus, these are the optional facilities / separate services and hence can’t be naturally bundled services as an inhabitant can still stay at the hostel without utilizing these facilities.
• Hence, GST on reverse charge will be applicable on the rental to be paid to the landowners by the applicant as the services of the applicant are leviable to GST and thus the applicant has to obtain GST registration.