GST Impact on Hotel & Restaurant Services: 55th GST Council Recommendation

Summary: The 55th GST Council meeting introduced changes to GST rates for hotel and restaurant services, effective from April 1, 2025. The definition of “Declared Tariff” is omitted, and GST applicability for accommodation is now tied to the actual value of supply from the preceding financial year. Key changes include a 5% GST rate (without ITC) for accommodation services priced at ₹7,500 or below and an 18% GST rate (with ITC) for higher-value accommodations. Restaurants in hotels can opt for an 18% GST rate with ITC by filing a declaration at the start of the financial year. New forms (Annexures VII, VIII, IX) have been introduced for registered persons to declare premises as specified or non-specified. These updates aim to simplify taxation, ensure transparency, and allow hoteliers flexibility in selecting GST structures. Competitive pricing under the new structure may benefit customers with lower tax rates on services priced below ₹7,500.

The GST Council in its 55^th Meeting made the following recommendation to the Government:-

‘3. To omit the definition of declared tariff and suitably amend the definition of specified premises (from the services rate and exemption notifications) to link it with actual value of supply of any unit of accommodation provided by the hotel and to make the rate of GST applicable on restaurant services in such hotels, for a given financial year, dependent upon the ‘value of supply’ of units of accommodation made in the preceding financial year, i.e. 18% with ITC if the ‘value of supply’ exceeded Rs. 7,500 for any unit of accommodation in the preceding financial year, and 5% without ITC otherwise. Further, to give an option to pay tax on restaurant service in hotels at the rate of 18% with ITC, if the hotel so chooses, by giving a declaration to that effect on or before the beginning of the financial year or on obtaining registration. The above changes to be made effective from 01.04.2025 to avoid any transition difficulties.’

Accordingly Government has issued Notification No.05/2025-Central Tax (Rate), dated 16th January’2025 duly making further amendments to Notification No.11/2017 CT-Rate dated 28.6.2017..

(i) In paragraph 4 relating to Explanation, with effect from the 1^st day of April,2025,:

(a) Clause (xxxv) shall be omitted;

(b) For clause (xxxvi), the following clause shall be substituted , namely:-

“(xxxvi)”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 filled a declaration, on or after the 1^st day of January and later than 31^st 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 acknowledgment for the registration application , declaring the said premises to be a specified premises,”.

(ii) After Annexure VI, three new Annexures VII, VIII and IX are inserted.

Summary of New Declarations Forms prescribed as per Notification No. 5/2025-Central Tax (Rate) dt.16.1.2025.

From the 1^st April, 2025 onwards these new rates of GST will be applicable to those, who are providing supply of Restaurant Services and Accommodation Services:

(i) 5% GST Rate (without Input Tax Credit (ITC) ) will be applicable , if the value of supply for units of accommodation is Rs.7,500/- or below per day in the preceding financial year,

(ii) @18% (With Input Tax Credit (ITC)) will apply if the value of supply of accommodation exceeds Rs.7,500/- per day.

(iii) Who are proving restaurant services in Hotel, such taxpayers are having an option to apply rate of GST@18% with Input Tax Credit (ITC) for restaurant services by submitting a declaration at the beginning of the financial year or upon obtaining registration.

Impact of these changes on Hotel Industry:-

(i) Increase Flexibility: A Hotelier can choose better tax structure based on operational preference and customers’ profiles,

(ii) Streamlining Tax Structure: The omission of “Declared Tariff” makes certain clarity in the GST applicability based on actual supply of value of accommodation.

(iii) Competitive Pricing in the market: The hotelier will provide hotel accommodation with competitive price under Rs.7,500/- can continue offering lower rate with a @5% GST Rate to increase his turnover in a financial year.

In the point of view of “Customers” Service recipients:

(i) Transparent Pricing: The TAX rates will reflect the actual value of services provided to the customers by ensuring transparency for customers,

(ii) Compatible GST Rates will be available on actual supply value of services: simplified the rules will help to eliminate discrepancies in raising bills.

Draft Annexures for ready reference;

“Annexure VII”.

OPT-IN DECLARATION FOR REGISTERED PERSON

(See para 4(xxxvi))

Declaration by a registered person supplying hotel accommodation service before the jurisdictional GST authority declaring the premises to be a ‘specified premises’.

Reference No.- Date: –

1. I/We ……………………. (name of Person) do hereby declare that the premises at ……(address)…… shall be a ‘specified premises’ for the Financial Year ………(yyyy- yy)……….

2. Further, I/We understand the said declaration will apply to the entire Financial Year specified in (1) above and will continue to apply to subsequent Financial Years also, unless I/We declare the premises as not a ‘specified premises’ by filing a declaration in the format specified at Annexure IX.

Legal:-

Name: –

GSTIN: –

PAN No.

Name of Authorized Signatory:

Signature of Authorized Signatory:

(Dated acknowledgment)

Note:

1. The above declaration, declaring the premises as a ‘specified premises’ for a Financial Year, shall be filed by a registered person on or after 1^st of January of the preceding Financial Year but not later than 31st of March of the preceding Financial Year.

“Annexure VIII”

OPT-IN DECLARATION FOR PERSON APPLYING FOR REGISTRATION

(See para 4(xxxvi))

Declaration by a person applying for registration before the jurisdictional GST authority declaring the premises to be a ‘specified premises’.

Reference No.- Date: –

1. I/We ……………………. (name of Person) have applied for registration vide ARN ………………………. and do hereby declare that the premises at ……(address)…… shall be a ‘specified premises’ from the effective date of registration till the end of the Financial Year.

2. Further, I/We understand the said declaration will apply to the subsequent Financial Years also, unless I/We declare the premises as not a ‘specified premises’ by filing a declaration in the format specified at Annexure IX.

Legal Name: –

ARN: –

PAN No.

Name of Authorized Signatory:

Signature of Authorized Signatory:

(Dated acknowledgment)

Note: The above declaration shall have to be filed separately for each premises.

“Annexure IX”

OPT-OUT DECLARATION.

(See para 4(xxxvi))

Declaration by a registered supplier of hotel accommodation service before the jurisdictional GST authority declaring the premises as not a ‘specified premises’.

Reference No.- Date: –

1. I/We ……………………. (name of Person) do hereby declare that the premises at ………(address)…… shall not be a ‘specified premises’ for the Financial Year ………(yyyy-yy)………,

2. Further, I/We understand the said declaration will apply to the entire Financial Year specified in (1) above and will continue to apply to subsequent Financial Years also, unless I/We declare the premises to be a ‘specified premises’ by filing a declaration in the format specified at Annexure VII.

Legal Name:

GSTIN/

ARN: –

PAN No.

Name of Authorized Signatory:

Signature of Authorized Signatory:

(Dated acknowledgment)

Note:

1. The above declaration, declaring the premises as not a ‘specified premises’, for a Financial Year, shall be filed on or after 1^st of January of the preceding Financial Year but not later than 31st of March of the preceding Financial Year.

2. The above declaration shall have to be filed separately for each ”.

Conclusion:

The New Recommendation of the 55^th GST Council on GST Rates to the Hotel Industry who are providing Accommodation Services and Restaurant Services to streamline taxation under GST will be depend on the actual value of accommodation supply in the preceding financial year. Further, New option allowed Hotels to Opt for a flat GST Rate @18% with Input Tax Crdit (ITC) by submitting a declaration.

Disclaimer

The above article is for knowledge purpose only, the author is not responsible for any legal binding. The views are purely personal and the above article is based on today’s GST Law position.

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