The Indian hospitality and food service industry thrives on providing exceptional experiences, but navigating the complexities of GST can often turn into a back-of-house headache. From budget hotels to luxury accommodations, standalone restaurants to elaborate outdoor catering services, the applicable GST rates and Input Tax Credit (ITC) eligibility vary significantly. This article aims to demystify the GST maze for hoteliers, restaurateurs, and caterers, offering a clear and concise guide to ensure smooth compliance and maximize tax benefits.
Types of Services and Applicable GST Rates:
| Category | Description | GST Rate | Input Tax Credit (ITC) |
| Hotels | Room Tariff ≤ Rs. 7,500 per day | 12% | Available |
| Luxury Hotels: Room Tariff ≥ Rs. 7,500 per day | 18% | Available | |
| Restaurants | Standalone Restaurants or Restaurants within Budget Hotels | 5% | Not available (composition scheme option available for turnover up to Rs. 1.5 crore) |
| Restaurants within Hotels (Room Tariff > Rs. 7,500 per day) | 18% | Available | |
| Outdoor Catering Services | Standalone or within Budget Hotels | 5% | Not available (composition scheme option available with turnover restrictions) |
| Within Hotels (Room Tariff > Rs. 7,500 per day) | 18% | Available |
Understanding Input Tax Credit (ITC):
ITC allows businesses to claim credit for GST paid on purchases used for providing taxable services. This effectively reduces the overall GST liability. However, the 5% GST rate for standalone restaurants and outdoor catering does not allow ITC claims.
Benefits of opting for the Composition Scheme:
- For restaurants with a turnover below Rs. 1.5 crore, the composition scheme offers a simplified tax filing process with a lower tax rate of 5%.
- One thing to note here is, in Composition Scheme you cannot collect GST from customer whereas in Normal Scheme you can collect GST from customer.
- Input Tax Credit is not available to restaurant in both the cases.
- In simple words, opting for composition scheme it will reduce the Tax Filing compliance compared to normal scheme but GST will have to be borne by Restaurant.
Simplified Table of GST Rates:
| Service Type | Room Tariff (per day) | GST Rate | ITC Eligibility |
| Hotels | ≤ Rs. 7,500 | 12% | Yes |
| Luxury Hotels | ≥ Rs. 7,500 | 18% | Yes |
| Standalone Restaurants | – | 5% | No |
| Restaurants (in Hotels) | > Rs. 7,500 | 18% | Yes |
| Standalone Outdoor Catering | – | 5% | No |
| Outdoor Catering (in Hotels) | > Rs. 7,500 | 18% | Yes |
Reference: Notification No. 20/2019-Central Tax (Rate) dated 30th September 2019 and Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022
Conclusion: Navigating GST for hotel, restaurant, and catering services is crucial for compliance and maximizing tax benefits. By understanding the applicable rates, ITC eligibility, and the advantages of the Composition Scheme, businesses in this sector can streamline their operations and ensure smooth tax compliance. It’s imperative for stakeholders to stay updated with relevant regulations to adapt to changes effectively and leverage opportunities for growth in this dynamic industry.
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Disclaimer: We request readers to seek professional advice before arriving at any decision/conclusion after reading. We are not responsible for any loss arising to anyone after referring and relying on this article. Above views are based on our understanding of the provisions.
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(Republished with Amendments)
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