Summary: Effective 22 September 2025, the GST Council’s revised tax structure alters the GST treatment for hotel accommodation while leaving restaurant, banquet, and food-and-beverage (F&B) services unchanged at 18% with full ITC. Under Notification No. 15/2025–CTR, rooms priced below ₹7,500 are now taxed at 5% without ITC, while rooms priced above ₹7,500 continue at 18% with full ITC. Hotels offering mixed room categories must perform monthly proportionate ITC calculations under Section 17 and Rules 42–43 to determine eligible credits on inputs, input services, and capital goods. Spa, health club, and beauty services now attract 5% without ITC, replacing the earlier 12% with ITC option. Restaurants must continue charging 18% GST on aerated drinks and mocktails, distinguishing them from aerated beverages sold as goods taxed at 40%. The framework clarifies tax rates, billing requirements, and ITC methodology for hotels and restaurants, ensuring smoother compliance and accurate GST reporting in 2025.
The following points outline essential information for proper tax compliance.
1. The new GST rates apply to which specific services
The new GST rate applies to hotel accommodation services through their room pricing system.
The GST rates for restaurant and banquet services and all food and beverage services operated at 18% with complete ITC benefits.
2. Official Notification
The GST rate change becomes effective through Notification No. 15/2025-Central Tax (Rate) which the government issued on 17th September 2025.
The Ministry of Finance published an FAQ document which explains the implementation process.
The current GST rates for restaurant and F&B services remain unchanged because they operate under previous tax regulations.
3. GST Rates for Mixed Scenarios (Rooms Below and Above Rs.7,500)
The GST rate for daily room prices under Rs.7,500 must be set at 5% without allowing ITC.
The GST rate for daily room prices exceeding Rs.7,500 remains at 18% while allowing full ITC benefits.
Restaurant and banquet and F&B services need separate billing because they receive 18% GST with full ITC benefits regardless of room prices.
4. ITC Eligibility in Mixed Scenarios
Hotels need to calculate their ITC eligibility through monthly turnover proportion calculations based on Section 17 and Rules 42 & 43.
The eligible ITC ratio needs to be determined at the end of each month to obtain the correct ITC amounts for inputs and input services and capital goods.
5. Important Clarifications
The GST rate for rooms priced under Rs.7,500 must be set at 5% without ITC because the 12% GST with ITC option no longer applies.
The tax rate for spa services and health club facilities and beauty parlour services now equals 5% without ITC benefits.
The new tax system reduces expenses for budget hotels but maintains higher tax rates for luxury hotel services.
6. Aerated Drinks & Mocktails in Hotels/Restaurants
The GST rate for aerated drinks sold as goods reaches 40% of the total price.
Restaurants subject aerated drinks and mocktails to 18% GST because they operate as food and beverage services.
The distinction between these two categories stops the 40% rate from applying to hotel soft drinks that customers receive with their meals.
Summary
The official notification contains only the accommodation GST rate change.
The GST rate for F&B and banquet services continues at 18% without any changes.
The GST rate for rooms priced under Rs.7,500 must be set at 5% without ITC benefits.
The ITC calculation process requires businesses to perform monthly proportionate calculations.
Restaurants must pay 18% GST on their aerated drinks and mocktails instead of the 40% rate.
The established framework provides clear guidelines for handling complex service combinations and ITC reporting requirements within the hotel industry under GST regulations during 2025.
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