The Niti Ayog’s Report on GST applicability on rental housing with dormitory-type accommodation for industrial workers.
The Finance Minister during the Budget 2024 has stated that rental housing with dormitory- type accommodation for industrial workers will be facilitated in public-private partnership (PPP) mode with Viability Gap Funding (VGF) support and commitment from anchor industries.
In the Union Budget 2024, the Finance Minister announced a significant initiative to address the need for workers’ accommodation: “Rental housing with dormitory-type accommodation for industrial workers will be facilitated in public-private partnership (PPP) mode with Viability Gap Funding (VGF) support and commitment from anchor industries.” To take concrete steps toward this budget announcement, a National Workshop on Site- Adjacent Factory Employee (SAFE) Accommodation was convened by NITI Aayog, with the Jana Group as the knowledge partner, on August 7, 2024, at Bharat Mandapam, New Delhi. The workshop focused on the critical shortage of workers’ accommodation near industrial areas, which drives workforce attrition, lowers productivity, and undermines the competitiveness and growth of India’s manufacturing sector.
GST Exemption On Lease Rentals
The GST exemption on lease rentals, in line with the latest GST circular
(Circular No. 228/22/2024-GST), which exempts certain long-term accommodation services from GST obligations. A clarification that SAFE accommodation is covered under this exemption should be provided by the appropriate authority to ensure clarity on this matter.
GST And Hotels
Until recently, hostels were subject to Goods and Services Tax (GST). However, in July 2024, the latest GST circular26 introduced an exemption for certain long-term accommodation services. This exemption applies to accommodations priced at Rs. 20,000 or less per person per month, provided the service is offered for a continuous period of at least 90 days.
Affordable Rental Housing (ARH) Scheme under PMAY – U & GST
According to the GST circular, accommodation services are exempt from GST if the value of supply is `20,000 or less per person per month, provided the accommodation is supplied for a minimum continuous period of 90 days. The understanding of the working group on SAFE accommodation was that it meets these criteria, and therefore should be covered under this exemption.
Fiscal incentives
The government can exempt GST on construction of workers’ accommodation to bring down the capex cost.
Operating expenses
Residential rates charged for operating ARHCs and exempting them from GST and income tax.
