GST on PG rent: the two tests, and the trap in the middle

Ask three people whether GST applies to a PG and you get three answers. One says a PG is residential accommodation, so it never applies. One says you are running a business, so it always does. The third says it depends, and then cannot tell you on what.

The third one is right, and what it depends on is two conditions that most owners have never had stated to them plainly.

This is orientation, not advice. GST rules on accommodation vary in how they are applied, they have changed more than once in the last few years, and the answer for your PG depends on numbers only you have. Nothing here is a substitute for a chartered accountant looking at your actual billing.

Why this is confusing in the first place

A PG sits between two things the law treats differently. The building is residential and the resident lives there — that is a home. But you are also supplying a service, often with food, cleaning, wifi and a bed rather than a flat, month after month, to a stream of people who are not tenants in the way a family renting a flat is a tenant.

Tax law resolved this with an exemption, not with a straight answer. Most PG beds fall outside GST — but they fall outside it because they satisfy conditions, not because a PG is inherently exempt. Once you know the conditions, you can tell in about thirty seconds which side of the line each bed in your house sits on.

The two tests, and both of them have to hold

Accommodation is exempt when:

1. The value of the supply is ₹20,000 or less, per person, per month, and
2. the stay runs 90 continuous days or more.

Two things about that pair matter more than the numbers.

They are tested per person, not per room. A four-sharing room at ₹9,000 a bed is four separate supplies of ₹9,000, not one supply of ₹36,000. Owners who assume the room is the unit talk themselves into a problem they do not have.

They are tested together. A cheap bed occupied for six weeks does not qualify, because the second test fails. A long-staying resident above the value line does not qualify either, because the first one does. A short-stay-heavy house — one taking working travellers for a fortnight at a time — is in a genuinely different position from a house full of students on annual stays, even at identical rent.

The trap: ₹20,000 is the value of the supply, not "the rent"

This is the part that catches people, and it is the reason to read the paragraph twice.

The test is on the value of the supply, and if you are supplying more than a bed, the rest of it counts. Food, wifi, laundry, housekeeping, electricity bundled into a single monthly figure — a resident paying you one amount for all of it is receiving one supply, and the whole amount is what gets measured against ₹20,000.

So a bed at ₹18,000 with a ₹3,000 food charge is not a ₹18,000 supply. Read plainly, exceeding the value line disqualifies the exemption even when the stay is long — the 90-day test does not rescue you from the value test. They are conditions, not alternatives.

Two practical consequences:

• Know what you actually bill each resident, per month, not on average. A house where most beds are at ₹12,000 can still have three beds near the line once meals and a premium room are added.
• Know how it is composed. Rent, food and services recorded as one undifferentiated number is a worse position to be in than the same total recorded line by line, whichever way the answer goes.

What happens to a bed that is not exempt

Here this article stops, deliberately, and you should be suspicious of any article that does not.

The GST treatment of accommodation has been revised more than once. Much of the published writing about PGs and hostels — including pages that still rank well and read authoritatively — predates that change and quotes the older rate. We could not find a source that explicitly works through what the post-September-2025 structure means for long-stay PG accommodation specifically, as opposed to hotels.

So we are not going to print a percentage. If you take one number away from this article, take this: do not take a rate for non-exempt PG accommodation from a blog, including this one. Take your actual monthly billing for the beds that fail either test to a CA and get the current rate confirmed against those numbers. It is a fifteen-minute conversation and it is the only version of this answer that is worth anything.

The other direction: GST on the rent you pay a landlord

Almost nobody writes about this one, and it is the one that affects operators who lease buildings rather than own them.

Renting a residential dwelling is normally outside GST. But where the person taking the property on rent is registered under GST, the liability is accounted for by the recipient under reverse charge. In plain terms: if you are registered, the rent you pay your landlord can become your GST liability to account for, even though your landlord is not charging it.

The corollary is the part owners care about. A PG whose supplies are all exempt may not be required to register at all — and where there is no registration, the reverse-charge liability on landlord rent does not arise either. Registration is the switch. Which means a decision made for some unrelated reason — registering to bill a corporate client, say — can quietly change the treatment of every lease you hold.

That is precisely the shape of question to put to a CA before you register, not after. It is also why an operator running several leased buildings should be able to see, per building, what is paid out in lease rent — because that is the number the question is asked about.

What to keep, so the question is answerable at all

None of the above can be worked out from memory at the end of the year. What makes it a short conversation instead of a long one:

• What each resident was billed, month by month — with rent separated from food and other services rather than merged into one figure.
• Move-in and move-out dates for every resident, because the 90-day test is a date question and "they've been here a while" is not an answer.
• The per-person split in shared rooms, so a four-sharing room never gets read as a single ₹36,000 supply.
• Agreements and invoices, kept per resident rather than per room.

This is exactly the record HamaraPG keeps by default: billing is per resident and per bed, invoices carry the booking they belong to, and the stay dates are the same dates the system uses to decide who owes what. Our pricing is per bed per month for the same reason — the bed is the unit the business runs on, and it is the unit your tax questions are asked in too.

The short version

Most PG beds are exempt. The exemption has two conditions and both have to hold. The one that catches owners is not the 90-day rule they worry about, it is the ₹20,000 line applied to everything you supply rather than to the rent alone. And if you lease your buildings, ask about reverse charge before you register for anything.

Two other articles pick up where this one stops: the agreement most PG owners skip, which is where "declarable income" gets discussed honestly, and what a PG actually earns, which is the arithmetic underneath all of it.