PGs and hostels across India are increasingly demanding rent in cash or adding 12 percent to cover GST. This is seen as a move to avoid the 12 percent Goods and Services Tax that applies to digital rental payments. A post on X by @IndianTechGuide brought attention to the issue by showing a notice that insisted on cash payments, revealing how some property owners are bypassing digital payment records to evade taxes.
Under GST rules effective from 15 July 2024, monthly rent below Rs 20,000 per tenant for stays over 90 days is exempt only if the property is a genuine residential dwelling. A 2022 ruling by the Karnataka Authority for Advance Ruling confirmed that PGs and hostels do not qualify, making them liable for the 12 percent GST unless a different exemption applies.
To avoid this liability, some landlords are turning to cash payments, which leave no digital trace. This allows underreporting of income, violating the Income Tax Act, 1961, which penalizes tax evasion. This approach also goes against the Reserve Bank of India’s 2025 push for digital payments and national efforts to maintain transparency in transactions.
Tenants, particularly students and low-income renters, are most affected by these demands. They face the risks and inconvenience of cash payments, which also prevent them from keeping proper records. Such records are essential for proving residence, getting benefits, or resolving disputes. This practice creates stress and unfair conditions for vulnerable groups.
Stricter regulations and better awareness are needed to protect tenants and ensure fair taxation. Strong enforcement combined with informed tenants and responsible landlords can help stop this harmful trend and support the shift towards modern payment systems.
