Indian tourism industry is a major contributor to the Indian Economy, and it is expected that it will grow at a higher pace in times to come and become a major revenue earning industry for the Government. Hotels and restaurants are a major component of the tourism industry and can be termed as the backbone of the industry without which the industry cannot survive. Further, it provides employment opportunities to a large population of the country and a large number of micro, small and medium entrepreneurs are dependent on this sector as a source of their livelihood. Thus, it becomes very important for the Government to address issues faced by the industry and ensure its smooth progression.
In the erstwhile regime, hotel & restaurant industry was faced with the problem of compliance with multiplicity of taxes viz. VAT, Service Tax, Luxury Tax and even excise duties on manufacture of pastries etc. However, with the advent of the GST Law, all these taxes have been subsumed under one single tax. However, with the new law has come a variety of new problems and issues which are facing the industry.
Hotels may to be understood to be one providing facility of lodging or accommodation and may or may not include fooding or other facilities. However, a restaurant may be meant to be a common place where people enjoy cooked food and other facilities as per their preferences. A restaurant does not provide any lodging facilities, but a hotel may also provide restaurant services in addition to lodging. The rate structure under the hotel and restaurant industry has undergone drastic changes within these initial years of the introduction of the GST Law. This article delves into the implications of GST on hotels and restaurants, analyzing rate structures, billing procedures, and industry stabilization.
In the following tables, a detailed account of the changes in GST Rates over the period of time has been given:
Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 as amended reads as under:
| 7 | Heading 9963 (Accommodation n, food and beverage services) | (i) Supply of 'hotel accommodation' having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent. | 6 | – |
| (ii) Supply of 'restaurant service' other than at specified premises | 2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation No. (iv)] | ||
| (iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms. | 2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation No. (iv)] | ||
| (iv) Supply of 'outdoor catering', at premises other than 'specified premises' provided by any person other than—
(a) suppliers providing 'hotel accommodation' at 'specified premises', or (b) suppliers located in 'specified premises'. |
2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)] | ||
| (v) Composite supply of 'outdoor catering' together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) at premises other than 'specified premises' provided by any person other than—
(a) suppliers providing 'hotel accommodation' at 'specified premises', or (b) suppliers located |
2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)] | ||
| (vi) Accommodation, food and beverage services other than (i) to (v) above Explanation.—
(a) For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv) and (v) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5), which is a . . . (e) This entry covers composite supply of 'outdoor catering' together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) provided by suppliers providing 'hotel accommodation' at 'specified premises', or suppliers located in 'specified premises'.] |
9 | -] |
4. Explanation – For the purposes of this notification,-
| (xxxii) | “Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied. |
| (xxxiii) | “Outdoor catering” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature. |
| (xxxiv) | “Hotel accommodation” means supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation. |
| (xxxv) | “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. |
| (xxxvi) | “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.
|
Hotel Room Rent
| Changes proposed in 14th GST Council Meeting dated 18th & 19th May, 2017 effective from 01-07-2017 vide Notification No. 11/2017 dated | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | Rs. 0 to Rs. 1,000/- per day | Exempt |
| 2 | Rs. 1,001/- to Rs. 2,499/- per day | 12% with full ITC |
| 3 | Rs. 2,500/- to Rs, 4,999/- per day | 18% with full ITC |
| 4 | Rs. 5,000/- and above per day | 28% with full ITC |
–
| Changes proposed in 37th GST Council Meeting dated 20-09-2019 vide Notification No. 20/2019-Central Tax (Rate), dated 30-9-2019, w.e.f. 1-10-2019 | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | Rs. 0/- to Rs. 1,000/- per day | Exempt |
| 2 | Rs. 1,001/- to Rs. 7,500/- per day | 12% with full ITC |
| 3 | Rs. 7,501/- and above per day | 18% with full ITC |
–
| Changes as per Notification No. 3/2022-Central Tax (Rate), dated 13-07-2022 effective from 18-07-2022 | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | Rs. 0/- to Rs. 7,500/- per day | 12% with full ITC |
| 2 | Rs. 7,501/- and above per day | 18% with full ITC |
Thus, the final rate structure for hotels applicable as on date may be summed up as follows:
| Sl. No. | Room Rent | GST Rate | Chapter/ Section/ Heading |
| 1 | Rs. 0/- to Rs. 7,500/- per day | 12% with full ITC |
Heading 9963 (Accommodation, food and beverage services) |
| 2 | Rs. 7,501/- and above per day | 18% with full ITC |
Restaurant Industry
| Changes proposed in 14th GST Council Meeting dated 18th & 19th May, 2017 effective from 01-07-2017 vide Notification No. 11/2017 dated 28-06-2017 | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | Restaurants not having facility of air-conditioning or central heating at any time during the year and not having licence to serve liquor | 12% |
| 2 | Restaurants having facility of air-conditioning or central heating at any time during the year (whether serving liquor or not) | 18% |
| 3 | Restaurants serving liquor (whether having facility of air-conditioning or central heating or not) | 18% |
| 4 | Other than above | 18% |
| Changes proposed in 23rd GST Council Meetings dated 10-11-2017 vide Notification No. 46/2017-Central Tax (Rate), Dated 14-11-2017 effective from 15-11-2017 | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | All stand-alone restaurants irrespective of air conditioned or otherwise | 5% GST without ITC |
| 2 | Food parcels (or takeaways) | 5% GST without ITC |
| 3 | Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day | 5% GST without ITC |
| 4 | Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) | 18% GST with full ITC |
| 5 | Outdoor catering | 18% GST with full ITC |
| Changes proposed in 37th GST Council Meeting dated 20-09-2019 Effective from 01-10-2019 | ||
| Sl. No. | Room Rent | GST Rate |
| 1 | Outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 | 5% GST without ITC |
| 2 | Catering in premises with daily tariff of unit of accommodation is Rs 7501 and above | 18% with ITC |
| 3 | Indian Railways Catering and Tourism Corporation Ltd. or their licensees/ Indian Railways | 5% GST without ITC |
Thus, the final rate structure for restaurants applicable as on date may be summed up as follows:
| Sl. No. | Room Rent | GST Rate | Chapter/ Section/ Heading |
| 1 | All stand-alone restaurants irrespective of air conditioned or otherwise | 5% GST without ITC | Heading 9963 (Accommodation, food and beverage services) |
| 2 | Food parcels (or takeaways) | 5% GST without ITC | |
| 3 | Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day | 5% GST without ITC | |
| 4 | Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) | 18% GST with full ITC | |
| 5 | Indian Railways Catering and Tourism Corporation Ltd. or their licensees / Indian Railways | 5% GST without ITC | |
| 5 | Outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 | 5% GST without ITC | |
| 6 | Catering in premises with daily tariff of unit of accommodation is Rs 7501 and above | 18% with ITC |
Whether Declared Tariff Relevant in determining GST Rate?
Notification No. 13/2018-Central Tax (Rate) dated 26-07-2018 (Effective from 27-07-2018) read as under:
“(b) in items (ii), (vi) and (viii),-
(A) for the words “declared tariff” wherever they occur, the words “value of supply” shall be substituted;”
Thus, w.e.f. 27-07-2018 GST Rate on hotel room tariff shall be determined on the basis of value of supply i.e. value actually charged in the invoice instead of declared value.
E-Commerce Operators
E-Commerce Operators like Oyo Rooms, Swiggy, Zomato etc. have become an indispensable part of the hotel and restaurant industry. A major portion of the revenues of the industry is routed through these online platforms. These operators route orders to hotels and restaurants and in return they charge commission from them at agreed rates. The impact of such transactions may be understood as under:
a) GST on hotel tariff or restaurant bills shall be charged as usual according to the prescribed rates which has been discussed above.
b) GST on commission paid to E-Commerce Operators shall be 18%.
Let us understand the billing procedure followed by them:
Hotel Industry
| Sl. No. | Particulars | Amount (Rs.) |
| 1 | Room Tariff Charges | 10,000.00 |
| 2 | Discount 30% of 1 | 3,000.00 |
| 3 | Net Bill Value (1-2) | 7,000.00 |
| 4 | GST @ 18% on room tariff (18% of 3) | 1260.00 |
| 5 | Total Payable by Customer (3+4) | 8,260.00 |
| 6 | Service Fee of E-Commerce Operator (40% of 3) | 2,800.00 |
| 7 | GST @ 18% on Service Fee (SAC 996813) [18% of 6] | 504.00 |
| 8 | Total Bill of E-Commerce Operator (6+7) | 3,304.00 |
| 9 | Net Payable to Hotel by E-Commerce Operator (5-8) | 4,956.00 |
Note:
1) GST rate on hotel accommodation services is assumed to be 18% in above example, however it can also be 12% depending upon the room tariff in hotel.
2) TCS Provisions on E-Commerce Operators have been ignored in above table.
Restaurant Industry:
| Sl. No. | Particulars | Amount (Rs.) |
| 1 | Restaurant bill value | 100.00 |
| 2 | Restaurant Discount 10% | 10.00 |
| 3 | Net Bill Value (1-2) | 90.00 |
| 4 | GST @ 18% on food bill (3*18%) | 16.20 |
| 5 | Total Payable by Customer (3+4) | 106.20 |
| 6 | Service Fee of E-Commerce Operator | 10.00 |
| 7 | GST @ 18% on Service Fee (SAC 996813) [6*18%] | 1.80 |
| 8 | Total Bill of E-Commerce Operator (6+7) | 11.80 |
| 9 | Net Payable to Restaurant by E-Commerce Operator (5-8) | 94.40 |
Note:
1) GST rate on restaurant services is assumed to be 18% in above example, assuming room tariff to be above Rs. 7,500/-.
2) TCS Provisions on E-Commerce Operators have been ignored in above table.
Renting of Banquet Hall and Catering Services
Banquet hall services are different from restaurant or hotel services. Under banquet hall services, the primary service provided is renting of a premises for conducting an event. It may be with or without accommodation/ fooding facilities. However, under restaurant and hotel services the basic service provided is food and accommodation respectively. In case, banquet hall services are provided along with fooding and accommodation services, the same shall be considered as composite supply of services and the following SAC shall be applicable on such services:
| Chapter/ Section/ Heading | Description of Service | CGST | SGST/ UTGST | IGST | ITC |
|
Heading 9963 (Accommodation, food and beverage services) |
(iv) Supply of “outdoor catering”, at premises other than “specified premises” provided by any person other than- (a) suppliers providing “hotel accommodation” at “specified premises”, or (b) suppliers located in “specified premises‟ | 2.50 | 2.50 | 5.00 | Not Available |
| (v) Composite supply of “outdoor catering” together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) at premises other than “specified premises” provided by any person other than-
(a) suppliers providing “hotel accommodation” at “specified premises”, or (b) suppliers located in “specified premises” |
2.50 | 2.50 | 5.00 | Not Available | |
| (vi) Accommodation, food and beverage services other than (i) to (v) above
Explanation: (a) For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv) and (v) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5), which is a mandatory rate and shall not be levied at the rate as specified under this entry. (b) This entry covers supply of ‘restaurant service’ at ‘specified premises’ (c) This entry covers supply of ‘hotel accommodation’ having value of supply of a unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent. (d) This entry covers supply of ‘outdoor catering’, provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’. (e) This entry covers composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’. |
9.00 | 9.00 | 18.00 | Available |
As amended by Notification No. 20/2019-Central Tax (Rate) [F.NO.354/136/2019-TRU], Dated 30-9-2019
Applicability of Reverse Charge Mechanism
Reverse Charge Mechanism u/s 9(4) of the CGST Act, 2017 is not applicable to hotel and restaurant industry and thus no tax under the mechanism is to be paid. However, provision of Reverse Charge Mechanism as per Notification No. 04/2017-Central Tax (Rate) dated 28.06.2017 applies to the industry.
Time of Supply
As per Section 13 of the CGST Act, 2017, time of supply in case of services shall be the earliest of the following:
a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:
Thus, time of supply in case of hotel and restaurant services shall be:
If invoice generated,
| > Time of issuance of invoice, or | Earlier |
| > Time of provision of service | |
| > Time of recording in books of accounts |
If invoice not generated,
| > Time of receipt of payment, or | Earlier |
| > Time of provision of service | |
| > Time of recording in books of accounts
> |
Place of Supply
Section 10(3) of the IGST Act, 2017 states as follows:
“(3) The place of supply of services,
b. by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or
(4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.”
From, the above, it is clear that place of supply in case of hotel industry shall be the place of location of immovable property and in case of restaurant services shall be the location where the services are actually performed. The above provision gives rise to certain issues which has been discussed below:
a) Supplier and Recipient in separate states
If the hotel is located in Guwahati and the recipient of service is located in Delhi. In this case, the place of supply of service shall be Guwahati and CGST and Assam GST (AGST) will be charged and not IGST. Further, the recipient of service will not be able to avail ITC of the tax paid on such transaction as GST paid in Assam is not eligible in Delhi GST. While filing GSTR-1, the provider of service is required to mention the place of supply of service as Assam and apply CGST and SGST in the transaction.
b) Place of supply SEZ Units
Section 7(5) of the IGST Act, 2017 reads as under:
“(5) Supply of goods or services or both,-
(a)…….
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c)……
shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.”
Further, Circular No. 48/22/2018-GST, dated 14.06.2018, clarified that services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter-State supply.
Thus, as evident from the above provisions, in case of supply of hotel or restaurant services to a SEZ unit shall be charged with IGST and not CGST and SGST.
Conclusion
The industry after much uncertainty has finally reached a stage where we can say that the stabilisation of rates has come. However, with the evolving economy and technological advancements, required changes are expected to be made as and when required.
*****
Disclaimer: The above expressed views are purely the personal views of the authors. The possibility of other views on the subject matter cannot be ruled out. So the readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The authors are not responsible in anyway.
(Republished with amendments)
Author Bio
I went to a restaurant located in a hotel where i asked for the room tariff. The room tariff , on the reception counter, was informed to be Rs 4000. Since, the reported tariff( it was nowhere displayed in the hotel premises) was less than Rs 7500, the applicable GST rate was expected to be 5%. However, when the bill was paid, i noticed that the GST has been charged @ 18%. On enquiry, i was replied that the room charge is Rs 8000 and that is the reason, i have been charged GST @18%. Since i have availed only the dining service and on website also, the charges on various hotel booking sites are displayed in the range of Rs 3000 to rs 4000, it appears that hotel is charging GST wrongly with an intention to have the benifit of Input Tax Credit. Pl advise if a consumer court case is suitable?
HOTEL
We booked hotel accommodation for our client, received invoice for Rs 2950 (2500 +450 GST 18% ) from hotel, now taking a markup of rs 500 we billed to our client for Rs 3450 + 173 (GST @ 5% on 3450) , can we charge gst @ 5% and can we avail ITC of !8 % paid to hotel.
Please suggest
Sir,
We are a small travel agency , suppose we book hotel accommodation for our client and recd Invoice from hotel for Rs 2950 (2500 = gst 18%), now we take a markup of 500 and billed to our customer for 3450/- , can we charge to our customer for 3450 + 173 (GST @ 5% on 3450) , without availing ITC .
Please suggest
Rakesh
current tour & travels packages gst rate for hotel billing with hsn code for maintain tally entry .
I stayed in a hotel where they charged the room tariff rs 2500 approx for one person for one night stay. But they charged 18% gst on my food bill. I had consumed the food inside the room and resturant of the hotel is located in the hotel premises only. The food bill was approx rs 360. Did the gst 18%0charged by hotel on food is correct. This hotel is in U.P.
Sir my room rent at a resort was below 7500/night but the hotel charged 18% GST on food bill. Is that correct? Hotel said they have rooms above 7501 so they charge 18%. Is GST on food bill charged on the basis of room rent of the particular guest or on the basis of the highest room rent of the property?
Sir, I have given my hotel business on lease and receiving the lease rent on monthly basis. The business house taken another GST registration for hotel business. Now my confusion is can i surrender my GST registration as my hotel business is given on lease.
Thanks for the explanation, very well written. I have a question about the property with Hotel (less than 7500 tariff) and Restaurant in same premises. Hotel room rates are charges at 18% and food is charged at 5% however with out ITC. So, how about the common expenses like rent, marketing, sales, purchases etc.. Do I have to create a new company for restaurant and register as composition scheme and divide all expenses between 2 entities ?
RESTAURENT PAYING COMMISSION TO ZOMATO, SWIGGY ETC. AND THEY CHARGE GST ON THE COMMISSION. NOW MY QUESTION IS WHETHER WE CLAIM ITC ON GST PAID ON COMMISSION ??
Sir firstly I would like to congratulate you for drafting such nice article. However, with respect to the view of ‘Declared Tariff’ not relevant to determine GST Rate, I agree that in case of Room Accommodation Service, it is not relevant but for the purpose of determine GST rate applicable to Restaurants and Banquets situated in Hotel, it still holds relevance to decide the category of ‘specified premises’