GST on Hostel, Paying Accommodations to Attract 12% GST, Here's Why

gst on hostels

The Goods and Services Tax (GST) regime in many countries, including India, has been designed to simplify and standardize the tax structure for goods and services across all sectors. When it comes to hostels and paying guest (PG) accommodations, the applicability of GST can vary based on certain criteria, such as the charges per day and the nature of services provided.

As of the latest updates, hostel and paying guest accommodations have been brought under the GST umbrella, attracting a 12% tax rate. This decision is part of the broader effort to bring uniformity in tax rates for different services and ensure a level playing field for all service providers. Here’s why this tax rate is applied:

Reasons for 12% GST on Hostel and Paying Guest Accommodations

      • Standardization of Services: By applying a 12% GST rate, the government aims to standardize the tax structure across various types of short-term accommodation services, ensuring that similar services are taxed uniformly.
      • Increased Revenue: Implementing GST on such accommodations increases government revenue, which can be used for public services and infrastructure development. It ensures that all segments of the hospitality and real estate sector contribute to the economy.
      • Regulation and Formalization: Imposing GST helps in the regulation and formalization of informal sectors. Many hostels and PG accommodations operate without proper registration and regulation. Bringing them under the GST net encourages these entities to formalize their operations, thereby enhancing safety and service standards.
      • Input Tax Credit Benefits: For operators of hostels and PG accommodations, registering under GST allows them to claim Input Tax Credit (ITC) on the goods and services they purchase to run their business. This can lead to cost savings and potentially improve service quality.
      • Consumer Protection: With the formalization and standardization of the tax structure, consumers gain clarity on the taxes they are paying, and it safeguards their interests by ensuring they receive services from registered and compliant operators.

Impact on Consumers and Operators

      • For Consumers: The imposition of a 12% GST on hostel and PG accommodations might lead to a slight increase in costs for students and working professionals who rely on these services. However, it also promises improved transparency and potentially better services.
      • Operators: Hostel and PG operators need to ensure compliance with GST regulations, which includes registration, tax filing, and adherence to tax rates. While this may increase the administrative workload, it also offers benefits like the ability to claim ITC.


The application of a 12% GST on hostels and paying guest accommodations is aimed at standardizing the tax treatment of accommodation services, enhancing revenue, and encouraging the formalization of this sector. Both consumers and operators are impacted by this change, with implications for costs, compliance, and service quality.