Restaurant services in hotels with room rent above ₹7,500/day fall under 18 pc GST: CBIC

New Delhi, Mar 27 (PTI) Hotels charging a room rent above ₹7,500 a day at any time in any financial year will be considered ‘specified premises’ for the next fiscal and restaurant services provided inside such premises will attract 18 per cent GST with input tax credit, the CBIC said on Thursday.

From April 1, 2025, the taxability of such restaurants which operate inside hotels will be on the basis of value of supply (transactional value). This would replace the concept of ‘declared tariff’ which included 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.

“For the period starting from 01.04.2025, the value of supply of hotel accommodation in the previous FY, i.e., the transaction value charged for the said supply, would be the basis for determining whether the premises providing hotel accommodation service mandatorily falls under the category of ‘specified premises’ or not in the current FY,” the CBIC said in a FAQ issued on the topic of ‘Restaurant Service’ supplied at ‘Specified Premises’.

The CBIC has defined ‘specified premises’ as those 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 ₹7,500 per unit per day or equivalent.

Restaurant services inside such hotel units would automatically attract 18 per cent GST, with input tax credit (ITC).

Restaurant services inside hotels whose room rent has not crossed ₹7,500/unit/day in the preceding financial year will continue to attract 5 per cent GST, without ITC.

Also, those hotels which intend to charge over ₹7,500 room rent from the next fiscal can file an ‘opt in’ declaration with GST authorities between January 1 and March 31 of the ongoing fiscal. Also, hotels seeking new registration will have to fill in opt in declaration with 15 days of obtaining it declaring the said premises as ‘specified premises’.

The CBIC said the notion of ‘declared tariff’ was being replaced with ‘value of supply’ (i.e. transaction value) in the definition of specified premises, as the hotel industry has largely moved to a dynamic pricing model.

Making the ‘specified premises’ status of a premises providing hotel accommodation service, in the current FY, dependent upon the ‘value of supply’ of units of accommodation provided by the hotel in the previous financial year, will give certainty regarding the ‘specified premises’ status of a hotel for any financial year.

It will also “give an option to the supplier of hotel accommodation service to declare the premises as ‘specified premises’ so that the restaurants located in the said premises can avail the rate of 18 per cent with ITC on the supply of restaurant service”, the CBIC said.

EY Tax Partner Saurabh Agarwal said to simplify compliance, the CBIC has released FAQs clarifying that if the value of hotel accommodation exceeds ₹7,500 per day in preceding FY, the premises will be subject to 18 per cent GST with ITC. Hotels can voluntarily opt in for specified premises classification if the value doesn’t exceed ₹7,500 in previous FY, with the declaration valid until they opt out.

“This streamlined process eliminates the need for annual filings. Separate declarations are required for each premise, and for restaurants outside specified premises, the GST rate is 5 per cent without ITC,” Agarwal added.