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From April 1, hotels charging over Rs 7,500 per day will be ‘specified premises’ and restaurant services within will attract 18% GST with input tax credit
Starting from April 1, 2025, the taxability of restaurants operating inside hotels will be based on the transaction value. (Representative/News18 Hindi)
Staying in a hotel may become more expensive from April 1, as the government plans to impose additional taxes. The Central Board of Indirect Taxes and Customs (CBIC) announced that hotels charging more than Rs 7,500 per night for room rent at any time during the financial year will be considered as ‘specified premises’ for the next financial year.
The restaurant services provided within such premises will attract an 18 percent GST with input tax credit. Starting from April 1, 2025, the taxability of restaurants operating inside hotels will be based on the transaction value, replacing the current ‘declared duty’ system.
In a recently issued FAQ on ‘Restaurant service supplied in specified premises’, the CBIC clarified that the value of hotel accommodation in the previous financial year will determine whether the premises fall under the ‘specified premises’ category for the current financial year.
The CBIC defines ‘specified premises’ as locations where the value of any unit of accommodation is Rs 7,500 per unit per day or more in the previous financial year. Restaurant services within such hotels will automatically attract 18 percent GST with input tax credit.
Conversely, restaurants in hotels where room rent has not exceeded Rs 7,500 per day in the previous financial year will continue to attract 5 percent GST without input tax credit.
Hotels planning to charge more than Rs 7,500 as room rent in the next financial year must declare their ‘opt in’ status to GST officials between January 1 and March 31 of the current financial year. Newly registered hotels must declare their premises as ‘specified premises’ within 15 days of obtaining the registration.
The CBIC stated that the concept of ‘declared tariff’ is being replaced by ‘value of supply’ or transaction value, as the hotel industry has largely moved towards a dynamic pricing model. This arrangement will also give hotel accommodation service providers the option to declare their premises as ‘specified premises’, allowing restaurants located within to avail input tax credit at the rate of 18 percent on the supply of service.
In the FAQ, the CBIC clarified that if the value of hotel accommodation in the previous financial year is more than Rs 7,500 per day, the premises will be subject to 18 percent GST with input tax credit.
If the value does not exceed Rs 7,500 in the previous financial year, hotels can voluntarily opt for ‘specified premises’ classification, and the declaration will remain valid until they opt out.
The new arrangement eliminates the need for annual filings, with separate declarations required for each premises. For restaurants located outside the specified premises, the GST rate will remain at 5 percent without input tax credit.