Service tax for hostels

Any service is now taxable apart from those covered under Negative List (17 services) or under various exemption notifications.

I. There is a specific exemption provided for the hotel accomodation, wherein if the declared tariff is above Rs.1000/-, then the service tax shall be payable, vide Notification No.25/2012-ST dated 20 June 2012, the relevant extract of which is as follows -

"Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff[1] of a unit of accommodation below rupees one thousand per day or equivalent;

[1] 2(n)“declared tariff” includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit;"

II. Moreover, there is also am abatement provided of 40% on such renting vide Notification No.26/2012-ST dated 20 June 2012.

III. There is also an entry in negative list wherein , it is stated that

"Services by way of renting of residential dwelling for use as residence"

Hence, you may consider the above, and decide accordingly.