GST on Restaurants, Lodges, Marriage Halls and Pilgrim Rooms – Practical Guide for Owners and Consultants (With New Hotel Tariff Slabs)
In GST practice we see one big problem in hospitality line: restaurant owners, lodge keepers, marriage hall operators and even spiritual mutts are not clear about the correct rate and correct scheme. They do restaurant, rooms, convention hall, catering, sometimes liquor and cigarettes, and also sell through Zomato or Swiggy.
If we give one wrong advice on composition or wrong rate, the department can raise big demand with interest and penalty. So, we must be very clear on:
When restaurant can go under composition and when it must go under regular scheme
What is the present GST rate on hotel rooms – 5% up to 7,500 and 18% above 7,500 – and what about ITC
How to tax marriage halls / convention halls and full packages (hall + food + rooms)
How to handle food supplied through Zomato/Swiggy (e‑commerce)
How to treat pilgrim accommodation run by mutt / charitable trust
In this article I am using simple English so that both taxpayers and professionals can understand and explain to clients.
1. Composition scheme for restaurants – conditions and limits
Section 10 of CGST Act gives composition scheme for small taxpayers. For restaurants, a special composition rate of 5% of turnover (2.5% CGST + 2.5% SGST) is notified, but subject to strict conditions.
A restaurant can opt for composition only if:
Aggregate turnover in preceding financial year is within 1.5 crore (lower limit in some special category States).
It supplies food and non‑alcoholic beverages as restaurant service.
It does not serve alcohol for human consumption (liquor is outside GST).
It does not make inter‑State outward supplies.
It does not supply through e‑commerce operators like Zomato/Swiggy which are liable to collect TCS / pay tax under section 9(5).
It does not deal in excluded goods like ice cream, pan masala, tobacco products etc. notified as ineligible for composition.
Key compliance points for composition restaurants:
Tax rate: 5% on turnover, but no ITC on any inputs, input services or capital goods.
Cannot collect GST separately; must issue Bill of Supply, and must display board “composition taxable person, not eligible to collect tax”.
Must file CMP‑08 quarterly for payment and GSTR‑4 (annual) once in a year.
If a restaurant sells liquor, or wants to sell through Zomato/Swiggy, or crosses turnover limit, it cannot remain in composition and has to move to regular scheme from the date of contravention.
For many small vegetarian hotels or darshinis who do only local dine‑in and parcel without liquor and without e‑commerce, composition can still be a practical option, but they must understand the restrictions clearly.
2. Regular GST on restaurant services – 5% vs 18%
If a restaurant is not in composition (either by choice or because it is not eligible), then it falls under regular GST notification for restaurant services. Current position is mainly like this:
Standalone restaurants (including takeaway / delivery) – 5% GST without ITC.
Restaurants within hotels where room tariff is less than ₹7,500 – 5% GST without ITC.
Restaurants within hotels where room tariff is ₹7,500 or more – 18% GST with ITC.
Outdoor catering (not simple restaurant service) – generally 18% with ITC.
So, there are two broad cases:
Most ordinary restaurants and small hotels – 5% without ITC.
High‑end hotel restaurants (room tariff ≥ ₹7,500) or certain catering – 18% with ITC.
If they opt for 5% without ITC, they must not claim ITC on inputs, input services and capital goods used for restaurant service. If they want full ITC (for big capital investment, etc.), and they are in the category where 18% is allowed, they will have 18% outward GST on restaurant bills.
Liquor is outside GST (State excise/VAT). In a bar and restaurant:
Food and soft drinks – GST at 5% or 18% depending on category as above.
Liquor – only State tax (no GST).
Separate accounting is important to avoid confusion in audit.
3. New GST slabs for hotel / lodge rooms (corrected)
After the 2025 change, the position for hotel accommodation is now:
This is effective from 22 September 2025 as per recent notifications and widely reported in hospitality industry updates.
Important points:
Rate is on actual invoiced value per room per night, after discounts.
Up to ₹7,500, hotel has to charge 5% but cannot claim ITC on inputs and input services used for those rooms.
Above ₹7,500, hotel charges 18% and can claim ITC, which is useful for big hotels with heavy capex.
4. Convention / marriage halls and package functions
Convention centres, kalyana mantapas and marriage halls are generally taxed as “renting of immovable property / banquet or event services”, and most guidance and AARs apply 18% GST to such services.
Typical situations:
Hall rent only (no food) – usually 18% on rental charges with ITC on related inputs.
Hall + catering + decoration – many AARs treat full wedding package as composite or mixed supply where main element is event / mandap keeper service, so 18% on entire package.
Hall + rooms + food – if everything is one single contract and one price, department tends to argue composite supply with principal supply as event service → 18%. If invoices and contracts are clearly split (hall rent, room rent, restaurant bills separately), then each component can be taxed at its own rate (5% or 18% on rooms, 5%/18% on food, 18% on hall).
So, from advisory angle, hotels with halls should:
Decide whether they want to bill in a bundled way (simple for customer but usually 18% on full value), or
Bill separately to preserve different rates (5% on rooms up to 7,500, 5%/18% on restaurant, 18% on hall).
Document structure in writing (agreements, quotations) so that in any scrutiny you can defend your classification.
5. Food supplied through Zomato / Swiggy etc.
From 1 January 2022, restaurant service supplied through e‑commerce platforms like Zomato and Swiggy is covered by section 9(5).
ECO (Zomato/Swiggy) pays 5% GST on restaurant service supplied through its platform, in cash, and cannot take ITC on that tax.
The restaurant still issues invoice to customer, but for GST payment the liability is on ECO.
The value of such supplies still counts in the restaurant’s aggregate turnover for registration and for composition limit, but not for its own outward tax liability.
ECO charges commission plus 18% GST to the restaurant on that commission; restaurant can take ITC on this commission if under regular scheme and taking ITC.
For composition restaurants the rule is simple and harsh:
Composition taxpayer generally cannot supply via e‑commerce operator.
So, a restaurant under 5% composition cannot legally be on Zomato/Swiggy. If it joins, it should shift to regular scheme from that date.
Professionals must clearly warn small hotels who are eager to list on Zomato: “If you go to Zomato, you cannot stay in composition. Decide and plan from 1st April of next year or earlier.”
6. Charitable mutt / spiritual trust providing rooms to pilgrims
There is a common belief that “charitable trust means no GST”. That is not correct. GST exemption is limited and specific.
Circulars and AARs on charitable and religious trusts have clarified that:
Only defined “charitable activities” (education to poor, medical relief, advancement of religion or spirituality, etc.) are fully exempt.
Renting of rooms, halls, shops by trust is taxable unless it falls under specific exemptions with monetary limits and often only if it is within precincts of religious place.
Illustrative rulings (example pattern from Gujarat AAR on pilgrim accommodation near Ambaji temple):
Accommodation by trust within the temple premises, below notified tariff limit, can be exempt as “rooms within religious place for pilgrims”.
If the same trust runs a lodge outside the temple premises, even if for pilgrims and even if tariff is modest, AARs have held that it is a commercial accommodation service, taxable at normal hotel rates.
So, for a mutt near a famous temple:
Step 1: See whether rooms are inside the religious complex or clearly outside on a separate property.
Step 2: Check room tariffs. If below GST–7,500 → 5% without ITC; above 7,500 → 18% with ITC, unless a specific exemption entry applies.
Step 3: If they want to claim exemption as charitable religious accommodation, document the nature of activities, location map, temple boundary, room tariff and apply the correct notification entry, relying on AARs and circulars.
Many trusts have been surprised by rulings holding that accommodation outside temple boundary is taxable like any normal hotel, even though the trust is religious.
7. Numeric example – mid‑range vs luxury hotel (simple illustration)
To make it easy, let us compare two hotels, both in regular scheme (not composition):
Hotel A – mid‑range: rooms at ₹3,000 per night, restaurant, small hall.
Hotel B – luxury: rooms at ₹8,000 per night, restaurant, large banquet hall.
Assume for one month:
Hotel A:
Room revenue: ₹3,000 × 400 room‑nights = ₹12,00,000
Restaurant revenue (food only, no liquor): ₹5,00,000
Hall rent for small functions: ₹2,00,000
Hotel B:
Room revenue: ₹8,000 × 400 room‑nights = ₹32,00,000
Restaurant revenue: ₹12,00,000
Hall / banquet revenue: ₹10,00,000
Also assume monthly eligible input and input‑service GST (simplified):
Hotel A: total input tax relating to rooms + restaurant + hall = ₹3,00,000, but most use is for rooms and restaurant.
Hotel B: input tax = ₹8,00,000, again mainly for rooms and F&B plus hall.
7.1 Hotel A – mid‑range (room ₹3,000 ≤ 7,500)
Rooms (₹1,200,000):
GST rate on rooms up to 7,500 = 5% without ITC.
GST = 5% of 12,00,000 = ₹60,000.
No ITC allowed on inputs used for room accommodation.
Restaurant (₹500,000):
Standalone/regular restaurant generally 5% without ITC.
GST = 5% of 5,00,000 = ₹25,000.
No ITC allowed for restaurant service.
Hall (₹200,000):
Hall / convention rent – generally 18% with ITC.
GST = 18% of 2,00,000 = ₹36,000.
Total outward GST for Hotel A:
Rooms: 60,000
Restaurant: 25,000
Hall: 36,000
Total = ₹1,21,000
Input tax:
Suppose of the 3,00,000 input GST, 2,50,000 relates to rooms and restaurant, 50,000 relates to hall.
On rooms and restaurant, ITC is blocked because they use 5% without ITC.
On hall portion, ITC 50,000 is allowable and can be set off against 36,000.
Net GST payable in cash by Hotel A:
Outward GST 1,21,000 – ITC on hall 50,000 = ₹71,000 (rest of input tax becomes cost).
7.2 Hotel B – luxury (room ₹8,000 > 7,500)
Rooms (₹3,200,000):
GST rate above 7,500 = 18% with ITC.
GST = 18% of 32,00,000 = ₹5,76,000.
Full ITC allowed.
Restaurant (₹1,200,000):
Two possibilities depending on structure:
If treated as restaurant within hotel with room tariff ≥ 7,500, many references say rate is 18% with ITC.razorpay+1
GST = 18% of 12,00,000 = ₹2,16,000, ITC allowed.
If it opts or is allowed for 5% without ITC, then:
GST = 5% of 12,00,000 = ₹60,000, but no ITC on restaurant proportion.
For simplicity and to show heavy ITC model, we take case 1 (restaurant at 18% with ITC).
Hall / banquet (₹1,000,000):
Banquet hall – 18% with ITC.
GST = 18% of 10,00,000 = ₹1,80,000.
Total outward GST for Hotel B (18% model):
Rooms: 5,76,000
Restaurant: 2,16,000
Hall: 1,80,000
Total = ₹9,72,000
Input tax:
Total input GST = 8,00,000, all related to taxable services where ITC is allowed.
Net GST payable in cash by Hotel B:
9,72,000 – 8,00,000 = ₹1,72,000
7.3 What this tells us
Mid‑range hotel (rooms up to 7,500) enjoys low outward rate (5%), but loses ITC on big chunk of inputs. Its visible outward rate is small, but hidden tax cost is high.
Luxury hotel (rooms above 7,500) charges high outward GST (18%), but recovers significant ITC, so effective net burden may not be as high, especially when it has large capital and operating inputs.
As professionals we must not look only at rate; we must check the net cash outflow and the market position. Budget hotels often prefer 5% with no ITC, but once they start doing big refurbishments or increasing tariffs, they should compare numbers and see whether 18% with full ITC is better for them in long run.
8. Practical checklist for compliance
For restaurants and hotels under regular scheme:
Maintain separate ledgers for: rooms (by slab), restaurant, bar (liquor), hall, Zomato/Swiggy orders.
Ensure GSTR‑1 and GSTR‑3B show correct rate‑wise breakup: 5%, 18%, non‑GST.
For Zomato/Swiggy, show those supplies in appropriate 9(5) table; do not again pay GST on that turnover.
Keep agreements and split invoices ready for package functions.
For composition restaurants:
Check every condition: turnover limit, no liquor, no e‑commerce, no inter‑State, no excluded goods.
File CMP‑08 and GSTR‑4 in time; display composition board; issue bill of supply.
For marriage halls / convention centres:
Default rate 18%, with ITC.
Be careful with big “marriage packages”; structure invoices after considering tax impact and future scrutiny.
For charitable mutts / trusts:
Do not assume blanket exemption.
Identify clearly: inside temple or outside, room tariff, purpose, relevant notification.
Follow AAR principles that commercial‑style lodges outside temple are taxable at hotel rates.
Conclusion
For restaurants, lodges, big hotels, marriage halls and even spiritual mutts, GST is not one flat rate. It is a combination of:
Composition vs regular scheme for small restaurants
New hotel room slabs – 5% without ITC, 18% with ITC depending on tariff
Different treatment for restaurant service (5% without ITC for most; 18% with ITC in certain hotel cases)
18% on halls and marriage / convention services
Special 9(5) rule for food supplied through Zomato/Swiggy
Limited, conditional relief for charitable/pilgrim accommodation based on location and tariff
Small and medium businesses in this line should not take decisions only on “low percentage looks nice”. They should sit with their consultant, see tariff, see ITC on inputs and capital, and then decide whether composition or regular scheme and which rate pattern is best for them.
For us as professionals, our duty is to explain these things in plain language, show simple numeric examples like the ₹3,000 and ₹8,000 hotel comparison, and give written advice so that later, if there is any litigation, we can show that the client has followed the law and latest notifications in good faith.
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