There are three necessities for human survival: food, shelter, and clothing. We can choose from a few different possibilities for a place to live: Buildings / Apartments, Houses, Hotel or Hostels. Hostels are common and one of the most popular residential options for Indians. This article will inform you about GST on Hostel in detail.
What is a Hostel?
To put it simply, a hostel is a type of low-cost, short-term, shared, convivial housing in which people can rent a bed, typically a bunk bed in a dormitory, and utilize common areas like a lounge and sometimes a kitchen. There are both single-sex and mixed rooms available, with either private or communal bathrooms.
Types of Hostel
There are two basic kinds of hostels:
- Institutional dorms (many schools and universities, for example, offer some form of residential housing for students).
- Independent Hostels (Provided by individual operators to students and working professionals)
GST Applicability on Hostel
Services supplied by educational institutions to their students, members, and employees are free from GST as per entry No. 66 of Notification No. 12/2017 Central tax (Rate) dated 28.06.2017. In other words, GST Exemption is provided in the case Hostel Services are provided by educational institutions. However, the two points must be noted down.
- One, the services are given by Educational Institutions.
- Two, it offers these services to its students, associates, and employees.
AAR also ruled the same for GST applicability on hostels. Read more at: No GST on hostel fees if less than Rs 1k per day
Definition of Educational Institution
The term “educational institution” refers to a facility that offers the following types of teaching: (1) early childhood education,
(2) elementary education,
(3) middle school education,
(4) high school education or its equivalent.
Furthermore, it also includes education as part of a programme leading to a credential recognised by any legislation currently in effect and education within the framework of a recognised vocational education programme.
You can also understand about the mechanism of GST on educational institutions through visiting:
GST Applicability on Food Services provided by Hostels
It’s worth noting that in some cases, meals can also be given in addition to such hostel facilities. Depending on whether food is also given, the school may either (a) collect the fees itself or (b) hire a third party caterer to do so. In the event that a school directly collects fees for meals, this would be considered a composite supply in which the primary supply is education, and as such, GST would not be payable. In addition, the same will fall under the umbrella of “services” when applied to what a school offers its faculty, staff, and students. As a result, no Goods and Services Tax will be charged. (It should be noted that if such an educational institution outsources its catering services to a third party, such party will not collect GST from such an educational institution if it is engaged in the provision of pre-school education and education through the equivalent of high school) The Goods and Services Tax exemption does not apply if a third party collects payments for food from students or members directly (rather than via the school). However, it is mandatory for hostels as well as third parties or FBOs to get FSSAI Registration supplying food to students or workforce.
What if you lend your Hostel for other services?
If an institution decides to charge rent for the use of its campus or dormitories for non-academic events (such weddings, business meetings, etc.), that income will be subject to GST (since these services are not provided by educational institutions to its students, members and staff).
Our above discussion may be summed up as follows: First, the Goods and Services Tax (GST) is not required to be collected on fees for staying in hostels run by educational institutions. Private hostels (operated by individuals and catering to guests such as students and working professionals) are exempt from GST. However, It’s important to note that GST will apply if the aforementioned hostel is offered for any reason other than the residential purpose of students or workforce.
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