Hotels with Room Tariff Above ₹7,500 Must Levy 18% GST on Restaurant Services: CBIC
The Central Board of Indirect Taxes and Customs (CBIC) has announced that any hotel which charges room rent above ₹7,500 per day at any point during a financial year will be classified as a ‘specified premises’ for the following year. As a result, restaurant services offered within such hotels will attract 18% GST, with the benefit of input tax credit (ITC) available.
From April 1, 2025, the taxability of such restaurants which operate inside hotels will be on the basis of value of supply (transactional value). This would replace the concept of ‘declared tariff’ which included 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.
“For the period starting from 01.04.2025, the value of supply of hotel accommodation in the previous FY, i.e., the transaction value charged for the said supply, would be the basis for determining whether the premises providing hotel accommodation service mandatorily falls under the category of ‘specified premises’ or not in the current FY,” the CBIC said in a FAQ issued on the topic of ‘Restaurant Service’ supplied at ‘Specified Premises’.
The CBIC has defined ‘specified premises’ as those premises from where the supplier has provided in the preceding financial year, ‘hotel accommodation’ service having the value of supply of any unit of accommodation above Rs 7,500 per unit per day or equivalent.
Restaurant services inside such hotel units would automatically attract 18 per cent GST, with input tax credit (ITC).
Restaurant services inside hotels whose room rent has not crossed Rs 7,500/unit/day in the preceding financial year will continue to attract 5 per cent GST, without ITC.
Also, those hotels which intend to charge over Rs 7,500 room rent from the next fiscal can file an ‘opt in’ declaration with GST authorities between January 1 and March 31 of the ongoing fiscal. Also, hotels seeking new registration will have to fill in opt in declaration with 15 days of obtaining it declaring the said premises as ‘specified premises’.
The CBIC said the notion of ‘declared tariff’ was being replaced with ‘value of supply’ (i.e. transaction value) in the definition of specified premises, as the hotel industry has largely moved to a dynamic pricing model.
Making the ‘specified premises’ status of a premises providing hotel accommodation service, in the current FY, dependent upon the ‘value of supply’ of units of accommodation provided by the hotel in the previous financial year, will give certainty regarding the ‘specified premises’ status of a hotel for any financial year.
It will also “give an option to the supplier of hotel accommodation service to declare the premises as ‘specified premises’ so that the restaurants located in the said premises can avail the rate of 18 per cent with ITC on the supply of restaurant service”, the CBIC said.