we have a hostel running by our trust. i wanted to ask if service tax is applicable on such incomes. if yes then after what amount of income how much tax is applicable
31 July 2024
For a trust running a hostel, the applicability of service tax (now replaced by Goods and Services Tax or GST) and the related tax obligations are subject to specific regulations. Here’s a detailed overview based on current tax laws:
### **1. Applicability of GST on Hostel Services**
**Service Tax vs. GST:** - **Service Tax:** Service Tax was applicable before July 1, 2017. Since then, it has been replaced by the Goods and Services Tax (GST) under the GST regime.
**GST on Hostel Services:** - **GST Applicability:** Under the GST regime, the provision of services related to the accommodation in hostels is subject to GST. - **GST Rate:** The GST rate applicable to accommodation services in hostels is typically 12% (6% CGST + 6% SGST) or 18% (9% CGST + 9% SGST), depending on the type of accommodation and the amenities provided. This rate is subject to change based on GST Council notifications.
### **2. Exemptions and Threshold Limits**
**Exemptions:** - **Educational Institutions:** If the hostel is run by an educational institution and provides accommodation to students, it may be eligible for exemptions. Such hostels might not be subject to GST if they meet specific criteria outlined by the GST Council. - **Charitable Trusts:** If the hostel is operated by a charitable trust and provides services at a nominal rate or is specifically exempted under GST provisions, it may qualify for exemptions.
**Threshold Limits:** - **Small Taxpayer Threshold:** GST applies to entities whose aggregate turnover exceeds the threshold limit set by the GST Act. As of the latest updates, the threshold limit for registration is ₹20 lakhs (₹10 lakhs for special category states) for services. If the trust’s aggregate turnover (including hostel income) exceeds this limit, GST registration and compliance are mandatory.
### **3. GST Registration and Compliance**
**1. ** **Registration:** - **Requirement:** If the hostel’s aggregate turnover exceeds the threshold limit, the trust must obtain GST registration. - **Voluntary Registration:** Even if the turnover is below the threshold, the trust may opt for voluntary registration for better compliance and input tax credit benefits.
**2. ** **Invoicing and Filing:** - **Tax Invoicing:** GST-registered entities must issue tax invoices for services rendered. - **Filing Returns:** Registered entities must file periodic GST returns (GSTR-1, GSTR-3B, etc.) and comply with GST regulations.
**3. ** **Input Tax Credit:** - **Eligibility:** If the hostel is registered under GST, it may be eligible to claim input tax credit on purchases related to hostel operations, subject to the provisions of the GST Act.
### **4. Steps to Take**
1. **Review GST Notifications:** - **Verify GST Rates:** Check the latest GST notifications or circulars to confirm the applicable rate for hostel services.
2. **Assess Eligibility for Exemption:** - **Educational and Charitable Exemptions:** Verify if the hostel qualifies for any exemptions based on its operational nature and the nature of services provided.
3. **Compliance:** - **Registration:** Ensure GST registration if the aggregate turnover exceeds the threshold limit. - **Record Keeping:** Maintain proper records and documentation for GST compliance and input tax credit claims.
### **Summary:**
- **GST Rate:** Typically 12% or 18% on hostel services, depending on amenities. - **Exemptions:** Possible if operated by educational institutions or eligible charitable trusts. - **Threshold Limit:** GST applies if aggregate turnover exceeds ₹20 lakhs (or ₹10 lakhs in special category states).
**In conclusion,** for a trust running a hostel, GST is applicable unless specific exemptions apply. Ensure to check the latest GST rates and exemptions, obtain GST registration if necessary, and comply with GST filing and documentation requirements.
CAclubindia
