GST Rates & ITC on Hotel Accommodation & Restaurant Services

Everyone acknowledges that clean hotel accommodation and hygienic restaurant services are essential requirements to promote tourism in the country.  Let us understand GST implication on these services including changes made in GST rates in restaurants located in hotels with varying room rates. In the same breath, let us also analyse the contents of Notification No.5/2025-CTR dt 16.01.2025 along with Annexures therein, to find out whether the standalone restaurants/new restaurants taking registration not located in hotels are eligible for GST rate at 18% with input tax credit or not.

2. It may be noted that GST rate on hotel accommodation depends on the amount paid per room accommodation per day. Presently from 18.7.2022 onwards, GST is 12% for a room in a hotel which would cost upto Rs 7500 as per Notification 3/2022-CTR that amended Notification No. 11/2017-CTR. The room accommodation services upto a value of Rs 1000 per room/day were exempted till the exemption was removed with the issue of Notification No. 4/2022-CTR dt 13.7.2022 with effect from 18.7.2022. Presently, GST is 18% for a room in a hotel that costs more than Rs 7500 per room/day. Therefore, it is clear that hotel accommodation services attract two rates viz 12% and 18% depending on the amount paid for a room per day in a hotel.

3. Prior to issue of the Notification No. 20/2019-CTR dt 30.9.2019, hotel accommodation services were taxed, basing on declared tariff value of a room in a hotel irrespective of the discounts offered. But declared tariff is replaced with actual value charged for room per day by the hotel from 1.10.2019 onwards.

4. However, declared tariff continued to be relevant to determine the GST rate in a restaurant located in a hotel even after 1.10.2019. GST rate was 18% with input tax credit in a restaurant where hotel accommodation had a declared tariff above Rs 7500 per room/day and such hotel was known as “specified premises”. Restaurants in hotels charging less than Rs 7500 per room/day which are other than in “specified premises” and standalone restaurants would attract 5% GST without the benefit of input tax credit.

5. “Specified premises” mentioned in Notification No. 11/2017-CTR as amended by Notification No. 20/2019-CTR continue to be an important parameter to decide the GST rates on restaurant services even after issue of Notification No. 5/2025-CTR and two sample entries of Sl. No.7 of the Notification No.11/2017-CTR are extracted below to understand how the “specified premises” is affecting the GST rates on restaurant services.

6. A Notification 5/2025-CTR dt 16.1.2025 was issued amending basic Notification No.11/2017-CTR giving proformas of declarations to exercise option to pay 18% GST with input tax credit benefit and opt out to pay 5% GST without input tax credit benefit. The opt in and opt out declaration formats with Annexures-VII, VIII and IX are enclosed to the said Notification.

7. The Government redefined the “specified premises” for a financial year, to be eligible for 18% GST with input tax credit subject to filing declarations as detailed here under:

(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 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 acknowledgement for the registration application, declaring the said premises to be a specified premises;

8. Wherever 18% GST is mentioned in the Article, it is to be read as 18% GST with input tax credit benefit.

9. Out of (a), (b) and (c) above, there is a mention about ‘hotel accommodation’ at (a) and (b).

10. Restaurants in hotels mentioned at (a) are eligible to pay 18% GST without filing any declaration. However, restaurants located in hotels irrespective of the value of amount charged for room per day mentioned at (b) above can opt to pay 18% GST by declaring their premises as “specified premises” by filing a declaration as per Annexure-VII enclosed to the Notification No. 5/2025-CTR by 31^st of March of the preceding year. It may be seen from Annexure -VII, that it can be filed by the registered person providing hotel accommodation service only. It can be seen that the phrase ‘hotel accommodation’ is absent in (c) where a person applying for registration is also eligible to pay 18% GST by declaring their premises as “specified premises” by filing declaration in the format shown in Annexure-VIII within fifteen days of getting acknowledgement of the application for registration.

11. The owners of standalone restaurants both existing and new ones taking registration are curious to know if they can opt to pay 18% GST by filing declaration in the format shown in Annexure-VIII at (c) above as it does not mention ‘hotel accommodation’.

12. A careful perusal of Annexure-IX meant to be filed by persons at (b) and (c) above to opt out of 18% GST and go to 5% GST without input tax credit benefit, reveal that both kinds of persons mentioned at (b) and (c) above are hotel accommodation service providers only who also provide restaurant services from their hotel premises simultaneously.  It can be culled out from the keen perusal of Annexure –IX that persons at (b) and (c) above having declared as ‘not specified premises’ for some time after a year, are at liberty to opt in again to pay 18% GST by filing declaration in Annexure-VII. It may be seen that filing declaration to opt in to pay 18% GST in Annexure-VII is only by the hotel accommodation service providers.

13. Annexure-IX is reproduced here under for ready reference:

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: –

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.

14. Therefore, it is clear beyond any doubt that persons mentioned at (c) under Notification No.5/2025-CTR are hotel accommodation service providers only applying for new registration under GST law and the existing and new standalone restaurants are not eligible to opt to pay 18% GST.

15. In this regard, it is worthwhile to recollect that press communication released after the 55th GST council’s meeting also states that restaurants located in hotels are eligible to pay 18% GST. It is also advisable to go through the Notification No.5/2025 -CTR dated 16.01.2025 before making any business-related decisions.

(The views expressed are strictly personal views of the author.)