GST Rates on Hostel Services in Educational Institutions

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July 23, 2019

GST on Hostel Services

Levying a tax on the education sector is indeed a delicate but an important concern because education is not just a business, it is more about the social task which polishes and prepares our future generations. Government has an important role to play in this sector and so does government by providing free and compulsory elementary education to every child of the nation and exempting tax on educational services.

The commercialisation of education is also inescapable reliability of today’s date wherein the education sector has become a standardised industry with high profits.

So, to maintain an ideal symmetry, GST Act has kept core educational services provided/received by educational institutions out of the tax bracket ( fully exempted) while the other services are taxable at the standard rate of 18%. Let’s discuss about GST applicability on hostel running services.

GST on Students’ Hostel Services

Auxiliary services served to educational centres with the motive to impart education up to Higher Secondary level are GST exempted. Other education services which do not come under the exemption, would be taxed at a standard rate of 18% with complete applicability of ITC for such taxable services when the output service is unexempted.

Services provided by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by the means of charitable activities are also GST exempted.

Under the GST, the services, provided by an educational institution to its students, faculty /staff or to an educational institution, which is exempted from GST are as follows:

  • Transportation service to students, faculty and staff;
  • Catering as well as any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
  • Security or cleaning or housekeeping services provided in such educational institution;
  • Services relating to admission or examination up to higher secondary

Note: Service provided to an educational institution excluding an institution providing services by way of pre-school education and education up to higher secondary school or equivalent is treated as a taxable service.

GST on boarding and lodging (Hostels)

The commencement of GST reign did not elevate the boarding and lodging costs for parents of under-Class X students staying in hostels. Instead, GST, which subsumes more than a dozen local taxes, consequenced the reduction of the taxes levied on multiple components of education and all services that are given to students and staff.

Now, the Lodging and Boarding services served by educational institutions in hostels from the pre-school to higher secondary level are exempted from GST while 18 per cent GST is imposable on the annual fees payable to the schools/hostels for lodging.

When we talk about the GST on hostel services like lodging facility, under the GST Law, services for residential or lodging purposes by a hotel, inn, guest house, club, campsite, a hostel or by whatever name referred, having the specified tariff of a unit of accommodation below 1000 rupees per day is exempted from GST.

Related Post: GST Impact on Education Sector

GST on Hostel Mess

As far as the private institution which outsources its entire hostel facility to some third party for running and the said third party issues a monthly bill to the institution is concerned, GST @5% is liable on the foodstuff without ITC.

Hostel facility mainly includes mess and lodging services. The Mess facility provided to students and staff attracts 5% GST. Immaterial of whether it is served by the educational institution or an outside (foreign) contractor, services related to food or drink provided by a mess or canteen is always taxable at 5% without Input Tax Credit.

Application of GST on Training programs, camps, yoga and other programs

Training programs, camps, yoga and other programs are considered as commercial activities and therefore comes under GST tax bracket.

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