Paying Guest (PG) accommodation has become a popular housing option for students and working professionals across India. With this rising demand, many property owners and operators are unsure about their Goods and Services Tax (GST) obligations.
This article explains the latest GST provisions on PG accommodation, including the withdrawal of the ₹1,000 daily tariff exemption and the new long-term stay exemption for rent up to ₹20,000 per month, along with registration requirements, rates, and compliance rules.
1. What is Paying Guest (PG) Accommodation?
PG accommodation involves renting out part of a residential property to individuals (usually on a shared basis), along with amenities like food, housekeeping, Wi-Fi, and security. Unlike hotels, PGs typically cater to long-term residential stays, often on a monthly basis.
2. Exemption for Daily Tariff up to ₹1,000 Withdrawn
Earlier, accommodation services (including PGs, hostels, hotels, etc.) with a declared tariff up to ₹1,000 per day per person were exempt from GST.
👉 This exemption was withdrawn through Notification No. 03/2022–Central Tax (Rate) dated 13 July 2022, effective 18 July 2022.
After this withdrawal, all accommodation services became taxable, regardless of tariff, subject to applicable rates.
✅ However, a new exemption was introduced in July 2023 for long-term residential accommodation, which is highly relevant to PG and hostel operators.
3. Latest GST Exemption – ₹20,000 per Month & 90 Days Stay (Effective 27 July 2023)
As per CBIC Circular No. 230/2023-GST dated 27 July 2023, accommodation services provided for residential purposes (e.g., PGs, hostels, dharamshalas) are exempt from GST if both conditions below are met:
- 🏠 Monthly rent per person does not exceed ₹20,000, and
- 🕒 The stay period is 90 days or more (continuous stay of at least 3 months).
✅ If both conditions are satisfied, the service is treated as “renting of residential dwelling for use as residence” and is fully exempt from GST, even if the earlier daily tariff would have crossed ₹1,000.
4. GST Rate on PG Accommodation (Current Position)
| Particulars | GST Applicability |
| Daily tariff ≤ ₹1,000 (old rule) | ❌ Exemption withdrawn w.e.f. 18 July 2022 |
| Monthly rent ≤ ₹20,000 & stay ≥ 90 days | ✅ Exempt (new rule) |
| Monthly rent > ₹20,000 or stay < 90 days | ✅ Taxable (12% / 18%) |
| Short-term or hotel-type accommodation | ✅ Taxable |
👉 In short, the ₹1,000/day exemption no longer applies, and PG operators should rely on the ₹20,000/month + 90 days exemption if eligible.
📝 5. GST Registration Requirement for PG Owners
You need to register under GST if:
- Your annual taxable turnover exceeds ₹20 lakh (₹10 lakh in special category states), and
- You provide taxable accommodation services (e.g., short-term stays, monthly rent above ₹20,000, or stays less than 90 days).
If your PG service is fully exempt under the new long-term stay exemption, then such exempt turnover is not counted toward the registration threshold.
However, if you run multiple properties or offer other taxable services (e.g., catering, laundry), registration may still be required.
📚 6. Classification and HSN Code
PG accommodation typically falls under:
- HSN Code 996311 – Room or unit accommodation services in hotels, inns, guest houses, clubs and the like
- HSN Code 996322 – Other accommodation services (e.g., hostels)
Classification depends on the business model and nature of services.
⚖️ 7. Key Clarifications & Rulings
- CBIC Circular No. 32/06/2018-GST (12 Feb 2018) clarified exemption for renting residential dwellings for residence.
- Notification No. 03/2022 (13 July 2022) withdrew the ₹1,000/day exemption from 18 July 2022.
- CBIC Circular No. 230/2023-GST (27 July 2023) introduced exemption for long-term residential accommodation ≤₹20,000/month and stay ≥90 days.
- Advance Rulings (e.g., Srisai Luxurious Stay LLP, Karnataka AAR) have held that PG/hostel accommodation is taxable if conditions for exemption are not met.
🧾 8. Practical Compliance Tips
- ✅ Execute proper rent agreements specifying duration (90+ days) and rent amount.
- ✅ Maintain KYC and occupancy records to establish exemption eligibility.
- ✅ Keep separate accounting for exempt and taxable services.
- ✅ Register under GST if taxable turnover crosses the threshold.
- ✅ Issue GST invoices for taxable supplies and file returns on time.
🟢 9. Quick Summary
| Particulars | GST Applicability |
| Old ₹1,000/day exemption | ❌ Withdrawn w.e.f. 18 July 2022 |
| Monthly rent ≤ ₹20,000 & stay ≥ 90 days | ✅ Exempt |
| Monthly rent > ₹20,000 or stay < 90 days | ✅ Taxable |
| Short-term accommodation (like hotels/guest houses) | ✅ Taxable |
Conclusion
The old ₹1,000/day exemption no longer applies, and many PG operators may now fall under GST if they provide short-term or higher-rent accommodation.
However, PGs and hostels providing long-term residential stays (≥90 days) with monthly rent ≤ ₹20,000/person continue to enjoy full GST exemption, bringing much-needed clarity and relief to genuine residential operators.
Proper documentation, agreements, and compliance are crucial to avail exemptions and avoid future disputes.
✍️ Author’s Note
At Ganesh Kumar j and Co, Chartered accountants we assist PG owners, hostel operators, and accommodation businesses with GST registration, return filing, exemption advisory, and compliance. Contact us for expert support and smooth GST management.
Frequently Asked Questions (FAQ)
1. Is GST applicable when a PG owner pays rent to the building owner?
If the building owner is not registered under GST, then no GST is charged on the rent paid by the PG operator.
However, if the building owner is registered, GST @ 18% is applicable on commercial leasing.
If the property is rented for residential purposes (i.e., renting out a house to run a PG), the treatment depends on usage:
- If the PG owner takes the property on residential rent but uses it commercially, GST may apply as “renting of immovable property for business purposes.”
- The PG owner may have to pay GST under Reverse Charge (RCM) if the landlord is unregistered and the PG business is registered.
👉 This means PG operators should carefully classify the lease agreement (residential vs commercial) and determine their GST liability accordingly.
2. Can the PG owner claim Input Tax Credit (ITC) on rent paid?
Yes, if:
- The PG business is registered under GST
- The rent is used for providing taxable accommodation services
- Proper tax invoice is issued by the landlord
Then, the PG owner can avail ITC on the GST charged on rent.
3. Is long-term residential accommodation exempt for tenants staying in a PG?
Yes ✅
If the monthly rent does not exceed ₹20,000 and the stay is for 90 days or more, the service is exempt from GST, as per Circular No. 230/2023-GST (July 2023).
4. If a PG charges less than ₹1,000 per day, is it still exempt?
No ❌
The ₹1,000 per day exemption was withdrawn w.e.f. 18 July 2022. All accommodation services are now taxable unless covered by the ₹20,000/month + 90 days exemption.
5. If the PG owner takes the building on rent for “residential use” and uses it for running a PG business
- The landlord is renting the property to the PG operator (a business).
- Even if the agreement mentions “residential purpose,” the actual usage is commercial because the PG operator is using the premises to provide accommodation services to paying guests.
- Therefore, the rent cannot be treated as “residential dwelling for use as residence” for GST exemption.
- 👉 GST applies if the landlord is registered OR if the PG operator is registered and liable to pay under Reverse Charge Mechanism (RCM) if the landlord is unregistered.
⚡ Example:
Landlord leases house to XYZ PG for ₹80,000/month. XYZ runs a PG.
- If landlord is registered → 18% GST on rent (Forward Charge).
- If landlord is unregistered and XYZ is registered → XYZ must pay 18% GST under RCM.
6. If the building owner rents directly to the individual students / working people (end residents)
- This is “renting of residential dwelling for use as residence”, which is exempt from GST.
- No GST is applicable irrespective of the rent amount.
- But in this case, the PG owner would not be a tenant — the landlord would deal with individuals.
7. Practical Approach Commonly Used
Many PG operators try to classify the lease as “residential use” to avoid GST. But under GST law, the substance of the transaction matters more than the wording.
If a business entity takes a property on lease to run a PG, the usage is commercial, and GST is likely to apply.
👉 Simply calling it “residential” in the agreement is not enough to claim exemption if the actual use is business.
✅ Summary Table
| Scenario | GST on Rent to Building Owner |
| Residential dwelling rented to individuals for residence | ❌ Exempt |
| Residential property rented to PG operator (business) but used for PG activity | ✅ Taxable @18% (Forward or Reverse Charge) |
| Commercial property rented to PG operator | ✅ Taxable @18% |
| Landlord unregistered + PG operator unregistered | ❌ No GST (but also no ITC benefit) |
⚠️ Important
If the PG operator is registered under GST and receives a residential property from an unregistered landlord, then RCM applies (as per Notification No. 05/2022-CT (Rate), w.e.f. 18 July 2022). The PG operator must self-pay 18% GST.
🟡 Conclusion
- Merely classifying the rental as residential in the agreement does not make it GST-exempt if the lessee is a business using it for commercial PG operations.
- GST will not apply only if the lease is truly for residential use by individuals, not for running a business.