GST On Hotels And Restaurants In 2026 One Property, Multiple GST Rates

A Comprehensive Decision-Based Guide to GST on Accommodation, Specified Premises, Restaurant Services, Banquets, Input Tax Credit (ITC), Capital Goods, Online Travel Agencies (OTAs) and Compliance – Law Position Considered up to 3 August 2026

Executive Summary

GST for a hotel cannot be determined by selecting one tax rate for the entire property. A single hotel may simultaneously have rooms taxable at 5% without input tax credit, rooms taxable at 18% with input tax credit, restaurant services taxable at 5% or 18%, banquet hall rental taxable at 18%, banquet packages taxable at 5% or 18%, alcoholic liquor outside GST, packaged products taxable at their respective goods rates, and common expenditure requiring proportionate ITC reversal.

The most important planning issue is that becoming a specified premises does not convert every supply of the hotel into an 18% supply. The correct GST treatment must be determined supply-wise, property-wise and, in certain cases, room-wise and asset-wise.

ROOM VALUE TEST Up to Rs. 7,500: 5% without ITC Above Rs. 7,500: 18% with ITC	PREMISES STATUS Restaurant, room service and banquet rates depend on annual specified-premises status.
ITC TEST Classify every expense as eligible, ineligible, common or blocked.	CAPITAL GOODS Common capital credit may continue through the 60-month Rule 43 mechanism.

GST Dashboard: Rates at a Glance

Nature of supply	GST rate	ITC position
Hotel accommodation up to Rs. 7,500 per unit per day	5%	Not available
Hotel accommodation above Rs. 7,500 per unit per day	18%	Available, subject to conditions
Restaurant / room service at non-specified premises	5%	Not available
Restaurant / room service at specified premises	18%	Available
Outdoor catering / catering with function premises at non-specified premises	5%	Not available
Outdoor catering / catering with function premises at specified premises	18%	Available
Hall rental without catering	Normally 18%	Available, subject to conditions
Alcoholic liquor for human consumption	Outside GST	State VAT / excise applies
Packaged goods independently sold	Applicable goods rate	Subject to normal ITC rules

Figure 1: Start with the nature of supply; determine rate, place of supply, ITC and platform responsibility separately.

Article Roadmap

Section	What it covers
Part I	Hotel accommodation and the Rs. 7,500 unit-value test
Part II	Specified-premises status and its annual, property-wise effect
Parts III-V	Restaurant, room service, packages, banquets and catering
Parts VI-VIII	ITC classification, new-hotel capital expenditure, Rules 42 and 43
Parts IX-XV	Construction, alcohol, OTA/ECO, advances, place of supply, RCM and e-invoicing
Final section	Monthly controls, FAQs and management action checklist

Part I – GST on Hotel Accommodation

1. Current GST rates on accommodation

With effect from 22 September 2025, hotel accommodation is taxable as follows:

Value of accommodation	GST rate	ITC
Up to Rs. 7,500 per unit per day or equivalent	5%	Not available
Above Rs. 7,500 per unit per day or equivalent	18%	Available

–

Core rule: The threshold is tested for each accommodation unit and each day. It is not based on the star rating, property average tariff or total invoice value.

2. Accommodation rate decision flow

Actual accommodation value per unit per day

Up to Rs. 7,500 -> GST at 5% without ITC

Above Rs. 7,500 -> GST at 18% with eligible ITC

3. Meaning of per unit per day

The limit must be examined separately for each accommodation unit and each day. An accommodation unit may include:

• room or suite
• cottage or villa
• tent or houseboat
• serviced accommodation unit
• hostel room or bed, where independently supplied
• any other separately supplied lodging unit

Illustration 1: accommodation below the threshold

Particulars	Amount
Room charges: Rs. 6,000 x 2 nights	Rs. 12,000
GST at 5%	Rs. 600
Total invoice value	Rs. 12,600

ITC relating exclusively to this accommodation is not available.

Illustration 2: accommodation above the threshold

Particulars	Amount
Room charges: Rs. 8,000 x 2 nights	Rs. 16,000
GST at 18%	Rs. 2,880
Total invoice value	Rs. 18,880

Eligible ITC may be claimed subject to Sections 16 and 17 of the CGST Act.

4. Different rates within the same hotel

Room category	Actual value per day	GST treatment
Standard room	Rs. 6,500	5% without ITC
Deluxe room	Rs. 7,500	5% without ITC
Executive suite	Rs. 8,000	18% with ITC
Presidential suite	Rs. 15,000	18% with ITC

The threshold is crossed only where the value is above Rs. 7,500.

5. Can room values be averaged?

Room values should not ordinarily be averaged across different rooms, categories, guests, dates, peak and non-peak periods, or the complete duration of a stay.

Example: If a customer books one room at Rs. 7,000 and another at Rs. 8,000, the first room is taxable at 5% and the second at 18%. The hotel should not average the values and apply one common rate.

6. Seasonal rates, discounts and compulsory charges

Where a room with a published tariff of Rs. 9,000 is genuinely supplied for Rs. 7,000 after a commercial discount, the actual value may be Rs. 7,000 if the discount is legally permissible and properly documented.

• tariff sheets and approved discount policy
• booking confirmation and corporate agreement
• discount authorisation
• OTA statement
• customer invoice and payment record

Artificial division of a compulsory accommodation charge into resort fee, amenity fee, mandatory facility charge, service fee or utility charge should be avoided. A compulsory connected amount may form part of the accommodation value.

7. Accommodation up to Rs. 1,000 is not exempt

The earlier exemption for hotel accommodation valued up to Rs. 1,000 per day was withdrawn with effect from 18 July 2022. Consequently, accommodation charged at Rs. 700, Rs. 800, Rs. 900 or Rs. 1,000 is also taxable and is ordinarily covered by the current 5% rate without ITC.

Part II – Understanding Specified Premises

8. Why specified-premises status matters

Specified-premises status principally determines the GST treatment of restaurant service, room service, outdoor catering and catering supplied with banquet or function premises. It does not automatically determine the GST rate on accommodation.

Figure 2: Specified-premises status is normally determined for a financial year using the immediately preceding year or a valid opt-in declaration.

9. Annual and premises-specific test

For a financial year, a premises is treated as specified where the supplier provided, during the preceding financial year, any unit of hotel accommodation above Rs. 7,500 per day, or where a valid premises-wise opt-in declaration was filed in the prescribed manner.

Important distinction: Accommodation taxation is transaction-based. Restaurant and banquet taxation is linked to the annual status of the premises.

10. Illustration: one high-value room

During FY 2025-26, a hotel charged Rs. 6,500 for most rooms but supplied one suite at Rs. 8,000 on a festival date. Since at least one accommodation unit was supplied above Rs. 7,500, the property would ordinarily qualify as a specified premises for FY 2026-27.

11. Current-year high tariff does not immediately change the annual status

Issue	Treatment
One room supplied at Rs. 8,500 during a non-specified financial year	That room is taxable at 18%
Restaurant rate for the balance of the same year	Does not automatically change
Specified-premises status for the following year	May arise due to the high-value room supply

12. Multi-property hotel businesses

Property	Status	Restaurant rate
Hotel A	Specified premises	18% with ITC
Hotel B	Non-specified premises	5% without ITC
Hotel C	New property with valid opt-in	18% with ITC

Separate property-wise controls should be maintained for tariff records, declarations, revenue ledgers, ITC attribution, fixed assets and Rule 42/43 workings.

Part III – GST on Restaurant Services

13. Restaurant rate matrix

Restaurant supply	GST rate	ITC
Restaurant at non-specified premises	5%	Not available
Restaurant at specified premises	18%	Available
Takeaway / delivery from non-specified premises	5%	Not available
Restaurant service at specified premises	18%	Available

A non-specified restaurant cannot ordinarily choose to charge 18% merely to claim ITC. The 5% entry is a conditional prescribed rate, not a voluntary option.

14. Restaurant illustrations

Particulars	Non-specified premises	Specified premises
Food value	Rs. 2,000	Rs. 2,000
GST	Rs. 100 at 5%	Rs. 360 at 18%
Customer payable	Rs. 2,100	Rs. 2,360
ITC position	Not available	Available subject to conditions

15. Takeaway and doorstep delivery

Food supplied through takeaway, home delivery, room delivery or a food-delivery platform generally remains restaurant service. The mode of delivery does not, by itself, convert prepared restaurant food into an independent supply of goods.

Part IV – Room Service, Breakfast and Hotel Packages

16. Room service

Hotel status	GST on room service	ITC
Non-specified premises	5%	Not available
Specified premises	18%	Available

The hotel should maintain separate billing codes for room rent, room-service food, minibar supplies, laundry, spa, transport and other incidental services. Inclusion in one guest bill does not make every item accommodation.

17. Complimentary breakfast

Breakfast included in the room tariff may form part of a composite supply where it is normally bundled with the room, included in a single package, not independently optional and ancillary to accommodation.

Example: A room with compulsory breakfast priced at Rs. 7,000 may ordinarily follow the accommodation supply and attract 5%, where the package is naturally bundled.

Separate taxation should be examined where breakfast is separately priced, optional, independently transferable through coupons, supplied to non-resident guests, or commercially provided as an independent restaurant supply.

18. Composite supply versus mixed supply

Classification	Test	Tax result
Composite supply	Supplies are naturally bundled and one is the principal supply	Rate of the principal supply
Mixed supply	Independent supplies are combined for one price without natural bundling	Highest applicable rate among components
Separate supplies	Each component is independently contracted and priced	Tax each supply separately

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Are the components normally supplied together?

Yes -> identify the principal supply and apply its rate

No, but one combined price -> examine mixed supply at highest rate

Part V – Banquets, Conferences and Outdoor Catering

19. Banquet rate matrix

Nature of supply	Non-specified premises	Specified premises
Restaurant service	5% without ITC	18% with ITC
Outdoor catering	5% without ITC	18% with ITC
Catering with banquet premises	5% without ITC	18% with ITC
Hall-only rental	Normally 18% with ITC	Normally 18% with ITC

20. Composite banquet package

A banquet package may include the hall, food, serving staff, tables, chairs, housekeeping, sound system, basic decoration, lighting and event coordination.

Particulars	Non-specified premises	Specified premises
Package value	Rs. 2,00,000	Rs. 2,00,000
GST	Rs. 10,000 at 5%	Rs. 36,000 at 18%
Total	Rs. 2,10,000	Rs. 2,36,000
ITC	Not available	Available subject to conditions

21. Hall-only rental and artificial splitting

Where only a banquet hall, conference room or meeting room is rented without catering, GST is ordinarily payable at 18% and eligible ITC may be available. However, separate invoices for hall and food do not automatically establish separate supplies.

• whether food was compulsory
• whether one agreement covered the complete event
• whether the customer could appoint an independent caterer
• who collected the consideration
• who controlled and was responsible for the arrangement
• whether the supply was commercially offered as one package

22. Independent external caterer

Where the hotel rents only the hall and the customer independently appoints an unrelated caterer, the hotel may ordinarily charge 18% on hall rental while the caterer determines its own GST treatment. Separate contracts, invoices, payment obligations and performance responsibilities should be maintained.

Part VI – The Input Tax Credit Framework

23. ITC heat map

Credit category	Meaning	Typical hotel example
Eligible	Directly attributable to eligible 18% supplies	Repairs to a hall rented at 18%
Ineligible	Directly attributable to 5% no-ITC supplies	Food ingredients for a 5% restaurant
Common	Used for eligible and no-ITC supplies	Audit fee or common hotel software
Blocked	Restricted independently by Section 17(5)	Construction of hotel building
Non-business	Personal or unrelated use	Promoter personal expenditure

24. Directly ineligible credit

• food ingredients exclusively used in a 5% restaurant
• OTA commission exclusively relating to 5% accommodation
• toiletries exclusively used in rooms taxed at 5%
• kitchen repairs exclusively relating to a 5% restaurant
• consumables exclusively used for a 5% banquet package

25. Directly eligible credit

• food inputs exclusively used in an 18% restaurant
• repairs relating exclusively to hall rental at 18%
• OTA commission exclusively relating to accommodation taxed at 18%
• professional fees exclusively connected with eligible taxable supplies
• equipment used exclusively for an eligible 18% activity

26. Common and blocked credit

Common expenditure includes audit fees, legal and professional fees, management software, central reservations, common advertising, security and administrative expenditure. Such credit requires proportionate reversal. Construction of the hotel building, civil structures, capitalised civil renovation and other Section 17(5) expenditure may remain permanently blocked.

Part VII – New Hotel Capital Expenditure: The Critical Transition Issue

27. The practical issue

A newly opened hotel may be non-specified in its first financial year and specified from the following year. It may already have incurred substantial GST on restaurant furniture, room furniture, kitchen machinery, laundry equipment, generators, air-conditioning equipment, servers, banquet furniture and other plant and machinery.

Key question:Can this credit be claimed in year one, kept in the electronic credit ledger, reversed, or recovered when the hotel becomes specified?

Figure 3: Capital expenditure must be tested first for Section 17(5), then by exclusive, eligible or common use.

28. Capital goods versus immovable property

Asset category	Examples	General approach
Movable capital goods	Beds, movable tables, ovens, refrigerators, laundry machinery, computers	Examine actual/intended use and Rule 43
Assets requiring deeper classification	HVAC, lifts, fire systems, water-treatment plants, fixed installations	Examine plant-and-machinery definition and immovability
Blocked immovable property	Hotel building, civil structure, capitalised civil interiors	Generally no ITC under Section 17(5)

29. Asset-wise classification

Asset use	Illustrative asset	Likely ITC treatment
Exclusive 5% no-ITC use	Kitchen machinery used only for non-specified restaurant	Do not avail during exclusive no-ITC use
Exclusive 18% eligible use	Furniture used only for hall-only rental	Eligible subject to normal conditions
Common 5% and 18% use	Generator, central laundry or common server	Rule 43 apportionment
Low-tariff room use	Furniture dedicated to rooms up to Rs. 7,500	Generally ineligible
Variable room use	Furniture in rooms supplied below and above Rs. 7,500	Common-capital treatment may apply
Construction / civil work	Hotel building and capitalised civil interior	Generally blocked

30. Scenario A: capital goods are common from the beginning

Where future eligible use is definite, genuine and documented, an asset used or intended to be used across the non-specified and specified periods may be evaluated as common capital goods. Subject to the legal conditions, eligible GST may be availed, the useful life is taken as 60 months, and the portion attributable to no-ITC turnover is reversed every month.

Planning point: A general possibility of becoming specified is not enough. The intention should be supported by the project report, tariff strategy, management approval, franchise or operating plan, expected revenue mix and asset-location records.

31. Rule 43 illustration: before and after becoming specified

Particulars	Amount
Value of common capital goods	Rs. 1,00,00,000
GST paid	Rs. 18,00,000
Useful life for Rule 43	60 months
Monthly capital credit	Rs. 30,000

–

Period	No-ITC turnover ratio	Monthly reversal	Monthly eligible portion
Year 1: non-specified	90%	Rs. 27,000	Rs. 3,000
Year 2 onward: specified	30%	Rs. 9,000	Rs. 21,000

Figure 4: Illustrative effect of the change in turnover mix. The 60-month period does not restart when the premises becomes specified.

32. Scenario B: asset was exclusively used for a 5% no-ITC supply

Where restaurant machinery was genuinely acquired and used exclusively for a restaurant taxed at 5% without ITC, credit should not ordinarily be availed merely to park it in the ledger. If use later changes, the residual-credit and change-in-use provisions must be examined.

Particulars	Amount
GST paid on machinery	Rs. 18,00,000
Purchase date	15 July 2026
Change to eligible/common use	1 April 2027
Elapsed quarters or parts	3
Reduction: 3 x 5%	Rs. 2,70,000
Residual amount for further examination	Rs. 15,30,000

The residual amount must thereafter be dealt with under the applicable legal mechanism for the remaining useful life. A material claim should be supported by an invoice-wise legal note and change-in-use evidence.

33. Scenario C: room furniture continues to support 5% accommodation

Use of room	ITC treatment
Room always charged up to Rs. 7,500	Credit generally unavailable
Room always charged above Rs. 7,500	Credit may be eligible
Same room charged below and above Rs. 7,500	Common capital-goods treatment may apply

Specified-premises status does not convert low-tariff accommodation into an 18% supply. Accordingly, room furniture may remain partly or fully ineligible even after the restaurant becomes taxable at 18%.

34. Can valid credit remain in the electronic credit ledger?

Yes, but only if validly availed: Eligible or common capital-goods credit may remain in the electronic credit ledger after the prescribed reversals. It does not lapse merely because the financial year changes or the hotel becomes specified. Credit exclusively attributable to a 5% no-ITC supply should not be availed and parked merely in anticipation of future eligibility.

35. Time limit, intended use and depreciation

The hotel should not postpone all capital-goods decisions until the following year, because the statutory time limit for availing ITC may expire. Capital expenditure should be reviewed at purchase-order, invoice, capitalisation and commencement stages.

Where ITC is claimed on capital goods or plant and machinery, depreciation under the Income-tax Act cannot also be claimed on the same GST component. Any subsequently claimed residual credit should be adjusted in the fixed-asset and depreciation records.

36. Capital-goods control register

Field	Record to be maintained
Invoice and supplier	Supplier name, GSTIN, invoice number and date
Asset description and location	Room, restaurant, banquet, utility or common area
Nature of asset	Movable, plant, machinery, fixture or civil structure
GST and GSTR-2B	Tax amount and month of reflection
Initial and intended use	5%, 18%, common or blocked, with evidence
Rule 43 schedule	Start date, monthly amount, ratio and reversal
Change in use	Date and residual-credit computation
Depreciation	GST component excluded or subsequently adjusted
Specified-premises status	Relevant financial-year evidence

Part VIII – Common Credit Reversal: Worked Example

37. Monthly turnover and input tax

Supply	Turnover	GST rate	Output GST
Rooms up to Rs. 7,500	Rs. 10,00,000	5%	Rs. 50,000
Restaurant at non-specified premises	Rs. 4,00,000	5%	Rs. 20,000
Hall-only rental	Rs. 2,00,000	18%	Rs. 36,000
Total	Rs. 16,00,000	聽	Rs. 1,06,000

–

Input-tax category	Amount
Direct eligible credit relating to hall rental	Rs. 18,000
Direct ineligible credit relating to 5% supplies	Rs. 70,000
Common credit	Rs. 60,000

–

No-ITC turnover = Rs. 14,00,000

No-ITC ratio = Rs. 14,00,000 / Rs. 16,00,000 = 87.5%

Common-credit reversal = Rs. 60,000 x 87.5% = Rs. 52,500

–

Final credit position	Amount
Direct eligible credit	Rs. 18,000
Eligible common credit	Rs. 7,500
Total usable ITC	Rs. 25,500
Output GST	Rs. 1,06,000
Net cash liability	Rs. 80,500

This is a simplified illustration. The actual computation must follow Rules 42 and 43, including annual adjustment and the treatment of capital goods.

Part IX – Construction, Renovation and Interior Expenditure

38. Construction of the hotel building

GST on construction of the hotel building on the taxpayer own account is generally blocked under Section 17(5), even though the completed hotel will provide taxable services.

• civil contractor and works-contract charges
• structural work, masonry, flooring and roofing
• capitalised civil interiors
• architect and project-management services directly attributable to construction
• other expenditure forming part of immovable property

No retrospective revival: Specified-premises status does not remove a credit restriction that independently applies under Section 17(5).

39. Plant and machinery and repairs

ITC may be available for qualifying plant and machinery subject to the statutory definition, actual and intended use, attachment to immovable property, and Rule 43. Routine repairs that are not capitalised as construction may be eligible, while major renovation capitalised to the building requires separate Section 17(5) examination.

Part X – Alcohol, Service Charge and Packaged Goods

40. Alcoholic liquor

Invoice component	Tax treatment
Food and non-alcoholic beverages	GST
Alcoholic liquor for human consumption	State VAT and excise
Service charge attributable to taxable supply	Included in taxable value
Other taxable services	GST

Common expenses of a bar may require ITC reversal because alcohol is a non-taxable supply for GST credit-apportionment purposes.

41. Service charge and tips

A compulsory service charge collected and retained by the hotel ordinarily forms part of consideration and taxable value. The hotel should distinguish compulsory service charge, optional charge, direct employee tips, payroll-distributed tips and amounts collected as agent for employees.

42. Packaged goods and minibar products

Independent sale of sealed snacks, packaged water, confectionery, tobacco products, packaged bakery items, toiletries, souvenirs and minibar products may attract the applicable goods rate. The hotel should examine packaging, HSN, MRP declaration and manner of supply.

Part XI – Online Travel Agents and Food-Delivery Platforms

43. Restaurant supplies through an electronic commerce operator

For restaurant services covered by Section 9(5), the electronic commerce operator pays GST. The restaurant must still include turnover in aggregate turnover, maintain platform-wise reconciliation, account for commission separately and correctly report cancellations and refunds. TCS under Section 52 is not collected on supplies on which the ECO itself pays the entire GST under Section 9(5).

44. Restaurant at specified premises through a platform

Restaurant service at specified premises is generally outside the notified restaurant ECO-tax-payment mechanism. The hotel or restaurant ordinarily remains liable to charge and pay GST at 18%, subject to the actual arrangement.

45. Accommodation through an OTA

• the registered hotel ordinarily pays GST on the accommodation
• the OTA charges GST on commission or service fees
• the OTA may collect TCS where applicable
• the hotel should record gross booking revenue rather than only net settlement
• commission, discounts, cancellations, TCS and refunds must be reconciled separately

OTA expense relates to	ITC treatment
Room taxable at 5%	Generally unavailable
Room taxable at 18%	Generally available
Common marketing or platform fee	Proportionate reversal

46. OTA reconciliation format

Revenue and customer items	Platform and settlement items
Gross booking value	Commission and GST on commission
Room and meal value	TCS
Hotel-funded discount	Cancellation and refund
Platform-funded discount	No-show and other adjustments
Customer convenience fee	Net bank settlement

Part XII – Cancellation, Advances and Deposits

47. Cancellation and no-show charges

Underlying booking	Cancellation amount	GST treatment
Room booked at Rs. 6,000	Rs. 1,500	5% = Rs. 75
Room booked at Rs. 9,000	Rs. 2,000	18% = Rs. 360

Cancellation charges generally follow the GST treatment of the underlying intended supply. Banquet and event forfeitures should similarly be examined with reference to the intended principal supply and the contract.

48. Advances and double-tax risk

Advance received -> receipt voucher and applicable GST

Final invoice issued -> adjust the advance already taxed

Failure to adjust -> possible double payment of GST

Hotels should separately track room-booking advances, wedding deposits, banquet advances, corporate deposits, adjustments, cancellations, refunds and amounts forfeited.

49. Security deposits

A genuinely refundable security deposit is generally not consideration at the time of receipt. GST implications arise when the deposit is adjusted against accommodation, food, banquet services, damage, cancellation or another contractual consideration.

Part XIII – Place of Supply

50. Hotel accommodation

Location rule: The place of supply of hotel accommodation is the location of the hotel or immovable property.

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Hotel location	Customer GSTIN	Correct tax
Gujarat	Maharashtra	CGST + Gujarat SGST

The hotel should not charge IGST merely because the customer is registered in another State. Commercial difficulty in claiming the destination State SGST does not alter the statutory place of supply.

51. Restaurant, catering and foreign guests

The place of supply of restaurant and catering services is generally where the service is actually performed. Accommodation supplied in India to a foreign guest is not an export merely because the guest is non-resident, payment is received in foreign currency or an overseas agent arranged the booking.

52. Supplies to SEZ

Zero-rating should not be applied merely because the customer provides an SEZ GSTIN. The hotel should verify the Letter of Approval, authorised operations, place of supply, invoice particulars, endorsement and LUT or tax-payment route.

Part XIV – Reverse Charge Mechanism

53. Common RCM transactions

• legal services from advocates
• director services, where applicable
•  goods transport agency services
• specified security services
• specified renting of motor vehicles
• sponsorship services
• import of services
• notified government services and commercial-property renting transactions
• RCM tax is generally paid in cash. The resulting ITC may still require reversal where the inward supply supports 5% no-ITC activities.

Part XV – E-Invoicing, Registration and Composition

54. E-invoicing

E-invoicing generally applies where aggregate turnover has crossed the notified threshold of Rs. 5 crore in any relevant preceding financial year, subject to exclusions. It ordinarily covers B2B invoices, exports, SEZ supplies, debit notes and credit notes, but not normal B2C guest invoices.

Reporting control: From 1 April 2025, taxpayers with aggregate annual turnover of Rs. 10 crore or more are subject to the applicable 30-day e-invoice reporting restriction.

Hotels should integrate the IRP with property-management software, banquet and corporate billing, restaurant POS, credit-note processing and accounting software.

55. Registration and composition levy

Registration depends upon aggregate turnover, State threshold, compulsory-registration provisions, inter-State supplies, ECO transactions and Section 9(5). Eligible small restaurants may consider composition levy, but because a normal restaurant outside specified premises is already taxed at 5% without ITC, composition may offer compliance simplicity rather than a rate advantage.

Part XVI – Monthly GST Control Dashboard

56. Revenue reconciliation

• property-management-system revenue
• restaurant POS and room service
• banquet, spa and laundry systems
• OTA and food-delivery statements
• e-invoices and general ledger
• GSTR-1 and GSTR-3B

57. Rate reconciliation

5% / no-ITC categories	18% / eligible categories	Other categories
Rooms up to Rs. 7,500	Rooms above Rs. 7,500	Alcohol turnover
Non-specified restaurant	Specified restaurant	Packaged goods
5% banquet package	Hall-only rental / 18% banquet	Cancellations and advances

58. ITC reconciliation

• purchase register and GSTR-2B
• direct eligible and direct ineligible credit
• common and blocked credit
• Rule 42 and Rule 43 reversals
• RCM credit and vendor-payment compliance
• capital-goods register and depreciation records
• electronic credit ledger

59. Annual specified-premises review

1. Check whether any accommodation unit exceeded Rs. 7,500 in the preceding year.

2. Review opt-in or opt-out declarations property-wise.

3. Update restaurant and banquet billing codes for the new financial year.

4. Review capital-goods Rule 43 schedules and expected turnover mix.

5. Document the tariff and ITC strategy before the financial year begins.

Frequently Asked Questions

1. Can a hotel charge 18% on a room below Rs. 7,500 to claim ITC?

No. Accommodation up to Rs. 7,500 is taxable at 5% without ITC.

2. Can a non-specified restaurant voluntarily charge 18%?

Ordinarily no. The 5% rate without ITC is a conditional prescribed rate.

3. Does one high-value room make the hotel specified?

A room supplied above Rs. 7,500 in the preceding financial year may cause the property to become specified in the following financial year.

4. Does specified-premises status make every room taxable at 18%?

No. Rooms up to Rs. 7,500 continue to be taxable at 5%.

5. Is room service taxed at the room rate?

Ordinarily no. Room service is treated as restaurant service.

6. Is complimentary breakfast always taxed separately?

No. Where naturally bundled with accommodation, it may follow the accommodation supply.

7. Is hall rental always taxable at 18%?

Hall-only rental is ordinarily taxable at 18%. A hall-and-catering package may be taxable at 5% or 18%, depending upon premises status.

8. Can construction ITC be claimed after the hotel becomes specified?

No. Credit independently blocked under Section 17(5) does not become available merely because the hotel becomes specified.

9. Can valid capital-goods credit remain in the electronic credit ledger?

Yes, where it has been validly availed and the required Rule 43 reversals are made.

10. Can the hotel claim the entire furniture credit in the second year?

Not automatically. The credit depends upon whether the furniture supports 5%, 18%, common or blocked activities.

11. Does room furniture become fully eligible once the hotel becomes specified?

No. Room furniture relating to rooms up to Rs. 7,500 may remain ineligible or require proportionate reversal.

12. Is ITC available on restaurant ingredients?

At 5%, ITC is not available. At an 18% restaurant in specified premises, eligible credit may be available.

13. Is alcohol subject to GST?

No. State VAT and excise provisions continue to apply.

14. Who pays GST on food supplied through an app?

For restaurant supplies covered by Section 9(5), the ECO pays GST.

15. Who pays GST on accommodation booked through an OTA?

The registered hotel ordinarily pays GST on accommodation. The OTA charges GST on commission and may collect TCS.

16. Are cancellation charges taxable?

Yes. They generally follow the tax treatment of the intended principal supply.

17. Can IGST be charged because the customer has an out-of-State GSTIN?

Not for hotel accommodation. The place of supply is the location of the hotel.

18. Can depreciation be claimed on GST for which ITC is claimed?

No. Double benefit is not permitted.

19. Does valid ITC lapse at the end of the financial year?

No. Validly availed credit does not lapse merely because the financial year changes.

20. What is the most important control for a new hotel?

Classify capital expenditure before claiming ITC, with separate identification of eligible, no-ITC, common and blocked assets.

Management Action Checklist

Control area	Action required
Room billing	Configure separate 5% and 18% room codes
Specified premises	Determine status property-wise every year
Restaurant billing	Configure 5% or 18% based on premises status
Banquet billing	Separate hall-only and genuine composite packages
Purchase accounting	Tag each invoice as eligible, ineligible, common or blocked
Capital goods	Maintain a detailed 60-month Rule 43 register
Depreciation	Exclude or adjust GST claimed as ITC
OTA	Reconcile gross bookings, commission, TCS and settlement
Alcohol	Maintain separate GST and State VAT records
Advances	Link advance tax with final invoice adjustment
E-invoicing	Generate IRN within the applicable reporting period
Monthly review	Reconcile PMS, POS, books and GST returns
Annual review	Reassess specified-premises status and ITC strategy

Conclusion

GST compliance for hotels and restaurants is not merely a question of applying 5% or 18%. The correct treatment depends upon room value, premises status, the nature of each restaurant or banquet supply, composite-supply principles, asset use, place of supply, platform arrangements and internal accounting controls.

For a new hotel, GST planning should begin before the first capital purchase is made. A delayed review can result in loss of eligible ITC, incorrect credit availment, excess reversal, missed time limits, depreciation mismatch and avoidable litigation.

Integrated operating model: Tariff planning + specified-premises strategy + capital-goods classification + Rule 42/43 workings + OTA reconciliation + GST return controls.