Staying in a hotel above ₹7,500/night? Get ready to pay more for food

Restaurant services provided in hotels where the room rent exceeds ₹7,500 per day will attract an 18% Goods and Services Tax (GST) with input tax credit (ITC), the Central Board of Indirect Taxes and Customs (CBIC) clarified on Thursday.

In a detailed FAQ released ahead of the new financial year, the CBIC outlined the revised tax framework for restaurant services supplied at "specified premises," effective from April 1, 2025.

What qualifies as ‘specified premises’?

As per the updated definition, "specified premises" include hotels or properties that offered accommodation services exceeding ₹7,500 per unit per day in the previous financial year.

Can hoteliers voluntarily declare their premises as ‘specified’?

Yes. Hoteliers can voluntarily declare their premises as "specified" by filing a declaration between January 1 and March 31 of the preceding financial year.

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.

What GST rate applies to restaurant services outside ‘specified premises’?

For restaurant services outside such specified premises, a lower GST rate of 5% will apply, but without the benefit of ITC.

"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 the FAQ.

Can a hotel's 'specified premises' status change during the financial year?

The status of a premises as 'specified' or not will remain fixed for an entire financial year based on the previous year's supply value or a voluntary declaration and cannot be changed during the financial year.

Hotels charging above the ₹7,500 threshold in 2024-25 will automatically fall under the 18% GST slab for restaurant services in 2025-26, without needing additional filings.

Those seeking new registration will have to fill in opt-in declaration within 15 days of obtaining GST registration, declaring the said premises as 'specified premises'.

How will multiple premises under a single GST registration be assessed?

The CBIC further clarified that for hotels operating multiple premises under a single GST registration, each premises will be assessed separately. Only those exceeding the ₹7,500 supply value or declared as "specified" will attract the higher tax rate for restaurant services.

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.