By CA Surekha Ahuja
This comprehensive guide consolidates GST rates, exemptions, composition eligibility, RCM rules, illustrations, and practical tax planning for Hotels, Hostels, PGs, Budget Lodges, Night Shelters, Commercial Rentals, and Per-Day Backpackers.
GST RATES & EXEMPTIONS (2025–26)
| Accommodation / Service | Tariff / Duration | GST Rate | Exemption | Notes |
|---|---|---|---|---|
| Hotels / Guest Houses / Daily Hostels / Lodges | < ₹7,500/day | 5% | ❌ None | Standard commercial accommodation (new slab w.e.f. 22-Sep-2025) |
| Hotels / Guest Houses / Daily Hostels / Lodges | ≥ ₹7,500/day | 18% | ❌ None | Premium commercial accommodation |
| Residential PG / Hostel | ≥30 days / monthly | Exempt | ✔ Yes | Long-stay residential; falls under residential exemption |
| Charitable Night Shelters / NGOs | Any (≤ ₹1,000/day) | Exempt | ✔ Yes | Budget shelters run by trust/NGO only |
| Restaurant / Tea / Snacks inside hotel/hostel | Billed separately | 5% / 12% / 1% composition | ❌ | Depends on type of supply; 1% if composition eligible |
| Commercial property rent (office/guest house) | Any | 18% | ❌ None | Tenant pays RCM if landlord is unregistered |
Note: The <₹1,000/day exemption for commercial accommodation was withdrawn effective 18-Jul-2022 except for charitable accommodation. (CBIC Notification No. 05/2022‑CT(R))
RCM ON COMMERCIAL RENT
| Scenario | Effective Date | RCM Applicability | Notes / References |
|---|---|---|---|
| Commercial property rented by unregistered landlord → registered tenant | 10-Oct-2024 | ✅ Regular taxpayer pays 18% RCM | ITC claimable; Notification No. 09/2024‑CT(R) |
| Composition taxpayer renting commercial property | 16-Jan-2025 | ❌ Exempt | No GST liability; Notification No. 07/2025‑CT(R) |
| Interim period 10-Oct-2024 → 15-Jan-2025 | CBIC Circular 245/02/2025 | Regularized as-is-where-is | GST paid accepted; non-payment → no penalty |
| Residential property rental for residence | N/A | ❌ Not applicable | Exempt; no RCM |
COMPOSITION SCHEME — ELIGIBILITY & THRESHOLDS
A) Legal Basis
• Section 10 of CGST Act, 2017; Rules 3–5 of CGST Rules, 2017.
• Turnover limit: ₹75 lakh (general states), ₹50 lakh (special category states).
• Composition taxpayers cannot collect GST, cannot claim ITC, must issue Bill of Supply. (CBIC FAQ)
B) Accommodation & Ancillary Services
| Supply | Composition Eligible? | Notes |
|---|---|---|
| Hotels / Guest Houses / Daily Hostels | ❌ | Main accommodation (SAC 9963) not eligible |
| Short-stay PG / Hostel (<30 days / day-wise tariff) | ❌ | Taxable commercial accommodation |
| PG / Hostel (>30 days residential) | ✔ Only for taxable ancillary services | Accommodation exempt; food/laundry/WiFi/amenities may be included under 1% composition (turnover ≤2 cr) |
| Charitable Night Shelters | ✔ Optional | Only taxable ancillary services; main accommodation exempt |
| Commercial Renting (office/guest house) | ❌ | Not eligible for composition |
Important: Ancillary services must be billed separately to qualify for composition.
PER-DAY BACKPACKERS / HOSTEL WITH ANCILLARY SERVICES
Classification:
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Daily bed / room → Commercial accommodation, taxable
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Tea / snacks / small meals → Ancillary services, can be billed separately
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Duration <30 days → treated as hotel/hostel service; residential exemption not applicable
GST Rates for Ancillary Services:
| Component | Tariff / Billing | GST Rate | Notes |
|---|---|---|---|
| Room / Bed per night | Any | 5% (<₹7,500) / 18% (≥₹7,500) | Short-term accommodation |
| Tea / Snacks / Small Meals | Billed separately | 5% (restaurant) or 1% composition | Only if composition eligible |
| Laundry / WiFi / Amenities | Billed separately | 18% or 1% composition | If operator opts for composition for taxable services |
RCM IMPLICATIONS (PROPERTY RENT)
| Landlord Type | Operator Status | RCM Applicability |
|---|---|---|
| Unregistered landlord | Regular taxpayer | ✅ Pay 18% RCM, ITC claimable |
| Unregistered landlord | Composition taxpayer | ❌ Exempt (from 16-Jan-2025) |
| Residential property (>30 days stay) | Any | ❌ Not applicable |
ILLUSTRATIONS
| Scenario | GST / Composition Outcome |
|---|---|
| Hotel Room ₹1,200/day | 5% GST; composition ❌ |
| Hostel ₹800/day (<30 days) | 5% GST; composition ❌ |
| PG ₹10,000/month (>30 days) | Accommodation exempt; food/laundry taxable → composition 1% |
| Night Shelter ₹200/day (NGO) | Exempt; composition optional for ancillary services |
| Commercial Guest House Rent ₹90,000/month | Tenant pays 18% RCM if regular taxpayer; composition exempt after 16-Jan-2025 |
| Per-day backpacker example | Bed ₹400 → 5% = ₹20; Tea/snack ₹50 → 5% = ₹2.5 or 1% composition = 0.5; Laundry/WiFi ₹50 → 18% = 9 or 1% composition = 1 |
TAX-PLANNING STRATEGIES
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Separate Billing:
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Room = 5%/18% GST (cannot opt for composition)
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Ancillary services = 1% composition if eligible
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Long-Stay Residential Packages:
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Monthly PG >30 days → accommodation exempt
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Ancillary services → composition 1% if turnover ≤2 cr
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RCM Management:
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Composition taxpayers exempt from RCM after 16-Jan-2025
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Regular taxpayers must pay RCM; ITC claimable
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Turnover Management:
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Keep taxable ancillary turnover ≤2 cr to remain eligible for composition
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Documentation:
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Separate accommodation & services invoices
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Maintain duration of stay
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Self-invoice for RCM if applicable
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FINAL DECISION TABLE — ACCOMMODATION, RCM & COMPOSITION
| Stay Type / Service | Duration / Tariff | GST Rate | RCM | Composition Eligibility |
|---|---|---|---|---|
| Hotels / Guest House | Any daily | 5–18% | ❌ | ❌ |
| Hostel / PG | <30 days / per day | 5–18% | ❌ | ❌ |
| PG / Hostel | ≥30 days / monthly | Exempt | ❌ | ✔ Only for ancillary services |
| Night Shelters (Charitable) | Any | Exempt | ❌ | Optional for ancillary services |
| Commercial Rent | Any | 18% | ✅ Regular taxpayers; ❌ Composition | ❌ Not eligible |
KEY TAKEAWAYS
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<₹1,000/day exemption withdrawn; only charitable accommodation remains exempt.
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Composition taxpayers cannot opt for main accommodation, only taxable ancillary services (food, laundry, WiFi).
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Composition relief from RCM on commercial rent is applicable post 16-Jan-2025.
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Daily accommodation / hotels / short-stay PGs cannot opt for composition.
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PGs/hostels >30 days → accommodation exempt; composition 1% possible on taxable ancillary services.
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Segregation of accommodation and ancillary services is critical for GST planning and compliance.
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Maintain invoices, stay duration, and turnover records to remain eligible for composition and RCM relief.
