Hostel Accommodation to Attract 12% GST

Hostel Accommodation to Attract 12% GST: Impact on Students and Families
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In a recent development, hostel accommodation in India is set to become costlier as the Authority of Advance Ruling (AAR) has ruled that a 12% Goods and Services Tax (GST) will be applicable on the rent paid for hostels. This decision comes after the AAR clarified that hostels are not related to residential dwelling units and, therefore, do not qualify for GST exemption. This blog will delve into the implications of this ruling and its potential impact on students and their families.

Understanding the Ruling on Hostel Accommodation

The Bengaluru bench of the AAR, while considering the case of Srisai Luxurious Stay LLP, stated that GST exemption on accommodation services applied to charges up to ₹1,000 per day provided by hotels, clubs, campsites, etc. until July 17, 2022. However, they clarified that hostel accommodation does not fall under the same category, and therefore, GST will apply to it at the rate of 12%.

The AAR’s Lucknow bench dealt with a query presented by V S Institute & Hostel Pvt Ltd, a Noida-based organization. It validated that GST would apply to hostel stay priced below ₹1,000 per day starting from July 18, 2022.

Impact on Students

The application of 12% GST on hostel accommodation is likely to burden students financially. Many students opt for hostels due to their affordability compared to other forms of accommodation. With the additional tax, students may have to allocate a larger portion of their budget to cover housing expenses, leaving them with less disposable income for other essential needs like food, books, and transportation. This increase in expenses might create financial challenges for students, especially those from low-income backgrounds.

Furthermore, students who come from distant places to pursue higher education often rely on hostel facilities for a safe and convenient living arrangement. The increased cost of hostel accommodation could discourage students from availing of such services, leading to potential challenges in finding suitable and affordable alternatives. This could have repercussions on their academic performance and overall well-being.

Impact on Families

The added GST burden on hostel accommodation doesn’t only impact students but also directly affects their families. Families who are already financially supporting their children’s education might now be compelled to shoulder extra expenses as a result of the elevated tax rate. The combined impact of tuition fees, textbooks, and the amplified accommodation costs could place a strain on family budgets, thereby posing greater challenges in accessing quality education for numerous individuals.

Such financial pressures can create significant hurdles for students pursuing their educational aspirations. The increased GST burden disrupts the delicate balance of family finances, potentially forcing them to make difficult choices. The intensified tax rate, accompanying tuition fees, and rising accommodation costs collectively exacerbate the affordability crisis, further compromising the accessibility of quality education. This predicament not only affects individuals but also has far-reaching implications for the overall societal advancement that stems from a well-educated populace.

Policy Considerations

The decision to levy GST on hostel accommodation has sparked discussions about the broader implications on the education ecosystem. AMRG & Associates Senior Partner Rajat Mohan highlighted that the GST council should consider neutralizing the tax cost integrated into the entire education ecosystem, including student accommodation. A policy intervention in this regard could alleviate the financial burden on students and their families, ensuring access to education remains affordable and inclusive.


The recent ruling by the AAR to impose a 12% GST on hostel accommodation in India is likely to impact students and their families significantly. With the increased cost of living in hostels, students may face financial constraints, while families may experience added financial pressure to support their children’s education. It is crucial for policymakers to carefully consider the implications of this ruling on education affordability and take measures to ensure that access to quality education remains accessible to all.

In doing so, they can foster an environment that encourages learning and growth without burdening the educational journey with unnecessary financial hurdles.


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