Paying Guest Accomodation

[Mohit Gupta]

Two Buildings are taken on rent by Mr. A at say INR 60,000 per month, per building on a 11 month residential accommodation lease. The same building is then furnished and converted to a fully furnished accommodation with about 20 beds per building and given on rent to individual students and working women at a monthly rent averaging to about 8000pm. Their are individual meters installed for charging individuals residents for Ac and geyser electricity consumption.

As part of bundled services - meals are provided to all residents.

Please suggest if the service tax is applicable as the accommodation has been given to individuals for a long term stay averaging more than an year per individual.

As per the clauses read by me on Google: even though the total receipts are more than 11 lac per annum, service tax should not be applicable as

1. The sub tenancy of individuals should fall under residential dwelling - not meant for temporary stay but as home to individuals.

2. the rent collected by us per bed is far less than ₹ 1000 per day.

3. The period of stay of individuals is more than 3 months.

Please suggest if service tax is applicable.

Also please suggest on the impact of GST that becomes applicable effective July 2017.

[KASTURI SETHI]

Dear Querist, When you talk of bundled services, you avail abatement of 30 %. You cannot avail benefits of both worlds. I mean to say abatement and exemption on account of rent per person being less than ₹ 1000/- per day. Take one stand. Regarding GST,. nothing is confirmed till enactment.

[DR.MARIAPPAN GOVINDARAJAN]

Yes, what Shri Kasthuri says is correct.

AI Summary

Service tax on paying guest accommodation: choose either abatement for accommodation or exemption based on rent, not both. Applicability of service tax to paying guest accommodation depends on whether individual sub tenancies qualify as residential tenancy versus temporary stay, and on the tax treatment of bundled services: providers may claim the statutory abatement for accommodation services but cannot also claim exemption based on per person per day rent thresholds; the operator must choose a single tax position. Practical factors include rent per bed, duration of stay, separate utility charging, and inclusion of meals. GST effects were noted as not yet confirmed pending enactment.