GST's Rental Maze: Navigating the Unknown Terrain

There is still confusion over whether the ₹20k cap covers services or just accommodation

- Rohini Mukherjee, Divya Bhardwaj & Aashna Sehgal

Until last year, the hospitality and rental sectors benefitted from a broad tax exemption on renting residential properties. However, with effect from 15 July 2024, a separate conditional exemption was carved out specifically for accommodation services, relieving these services from the levy of goods and services tax, or GST.

This change—applicable to accommodation services provided for a continuous period of at least 90 days, and where the cost involved is under ₹20,000 per person per month—was aimed at easing the financial burden on those seeking affordable accommodation. However, implementing it has thrown up a number of practical challenges.

Lack of clarity on the scope of exemption Accommodation services typically include additionally offered services such as food, laundry, housekeeping, and gym facilities. But how should the ₹20,000 threshold for this exemption be assessed? Should it apply to the total package including the additional services? Or should each of these components be assessed separately and the exemption cover only the accommodation and not the additional services?

While the exemption aims to support students and professionals by making affordable accommodation GST-free, certain scenarios raise important questions.