Hyderabad: The recent ruling by the Authority for Advance Ruling (AAR) in Bengaluru has dealt a severe blow to residents of Paying Guest (PG) hostels, as they would now have to bear an additional 12 percent Goods and Services Tax (GST) on top of their room rent. The AAR’s decision clarified that PG hostels cannot be considered as residential dwelling units and are not exempted from GST, leading to concerns among young individuals struggling to survive in major cities like New Delhi, Mumbai, Pune, Bengaluru, and Hyderabad.
The ruling came in response to an advance ruling request by Srisai Luxurious Stay Hostel in Bengaluru. Following the AAR’s verdict, Vellampalli Mahidhar, Treasurer of the IT Corridor Hostels Association in Hyderabad, which represents over 3,500 hostel owners, expressed dismay and disclosed their intention to appeal to the Appellate Authority for Advance Ruling (AAAR). He emphasized that the burden of the additional tax ultimately falls on the youngsters who rely on PG hostels as their affordable accommodation option.
Highlighting the financial strain caused by skyrocketing real estate prices in major IT corridors, hostel owners had already been compelled to increase room rents, keeping in mind the modest entry-level salaries of around Rs 20,000 to Rs 25,000 for most young professionals. With an average room rent of Rs 6,000, the inclusion of the 12 percent GST brings the total to Rs 6,720, putting immense pressure on those moving to Hyderabad from various districts across the Telugu States.
Ravinder Mandadi, the proprietor of Amigos Luxury Mens PG Hostel situated in Kondapur, stated his intention to transfer the extra financial burden to his esteemed customers.Comparing the situation to hotel bills with GST, he explained that tenants would have to bear the brunt of the 12 percent tax. Additionally, Mandadi argued that hostel owners provide a home away from home for their residents by offering hassle-free living with services such as food, cleaning, and washing, which would otherwise be additional responsibilities if they rented apartments.
Furthermore, hostel owners revealed the challenges they faced during the pandemic and how they had already increased rents by 10 percent post-pandemic. They expressed concern that another rent hike may not be feasible in the current scenario.
As the hostel owners gear up to challenge the AAR ruling before the AAAR, the fate of thousands of PG hostel residents across the country hangs in the balance. The outcome of the appeal could determine whether these young individuals will continue to find affordable accommodation in urban centers or face further financial strain in the already competitive housing market.