CA Pranay Batra
GST rate for restaurant services has been laid down by the government vide Notification No. 17/2017-Central Tax (Rate). Recently, Central Government has changed definition of specified premise to provide an option to existing hotels which are providing restaurant or outdoor catering services.
Presently, supply of restaurant service other than at specified premise shall be taxed at 5% and the supplier would not be eligible to avail ITC. If the services are provided at specified premise, then supplier needs to pay tax it 18% and ITC on same can be availed.
Specified premise was earlier defined as “‘Specified premises’ means premises providing ‘hotel accommodation’ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”
Further, declared tariff was defined as “’Declared tariff’ means 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.”
Now, Government has omitted the definition of declared tariff and definition of specified tariff is substituted with below:
“Specified premises”, for a financial year, means
(a) a 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 seven thousand five hundred rupees per unit per day or equivalent; or
(b) a premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration, on or after the 1st of January and not later than 31st of March of the preceding financial year, declaring the said premises to be a specified premises; or
(c) a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises;
Impact of above Amendment:
This will provide an option to premises not having value of supply ,in previous year, for any unit of accommodation more than 7,500 to be considered as specified premise and pay tax at 18% with eligibility to avail ITC. A brief summary is provided below.
| Value of supply in PY for any unit of accommodation | Tax Rate for restaurant service | ITC for restaurant service |
| Equal or more than 7,500 | 18% | ITC available |
| Less than 7,500 (option not availed) | 5% | ITC not available |
| Less than 7,500 (option availed) | 18% | ITC available |
Availing the option here means opting to be considered as specified premise before 31st of March of preceding financial year.
Corresponding changes in definition of specified premise is also made in Notification No. 17/2017-Central Tax (Rate) which provides the services on which needs to be paid by supplies shall be paid by the electronic commerce operator (ECO).
The notification states that tax on “supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises.” shall be paid by ECO. Therefore, in cases where any registered person has opted to be a considered as specified premise will have to discharge liability on their GSTR-3B and ECO will no more be liable to pay tax on the same.
VERY GOOD