As per the latest clarification by the Central Board of Indirect Taxes and Customs (CBIC), restaurants located within hotels that charge over ₹7,500 per day for rooms are now categorised as operating within “specified premises”. Consequently, restaurant services in such establishments will attract an 18% Goods and Services Tax (GST), with the benefit of input tax credit (ITC).
In contrast, standalone restaurants or those situated in hotels with room tariffs below ₹7,500 will continue to attract a lower GST rate of 5%, but without ITC.
The CBIC defines “specified premises” as hotel properties where the actual transaction value of accommodation exceeded ₹7,500 per night in the preceding financial year. This classification directly affects the GST rate applied to restaurant services within the premises.
Notably, this threshold is determined not by the listed tariff, but by the actual price charged — offering more clarity and uniformity in implementation.
Hotels that did not exceed the ₹7,500 threshold in the previous financial year may still choose to be classified as “specified premises”. This is done by submitting a declaration between January 1 and March 31 before the start of the new financial year.
Once opted in, the classification will remain valid throughout the financial year, unless the hotel decides to opt out in a subsequent year. This change also eliminates the earlier method of using the ‘declared tariff’, which often caused confusion due to its inclusion of all room amenities but exclusion of discounts.
Hotels whose room rents fall below ₹7,500 in the preceding financial year are not automatically considered “specified premises”. They will only fall under this category if they voluntarily opt in through the declaration process.
If no such declaration is made, restaurant services in such properties will be taxed at 5% GST, but ITC will not be available.
Restaurants operating outside the boundaries of “specified premises” — including standalone eateries or those in budget hotels — will continue to be taxed at 5% GST. However, these establishments cannot claim input tax credit, making their effective tax burden potentially higher in operational terms.
The classification of a property as “specified premises” depends on two factors:
Hotels that exceeded the ₹7,500 threshold in 2024–25, for instance, will automatically fall under the 18% GST slab for restaurant services in 2025–26. This status will remain unchanged throughout the financial year, ensuring consistency.
Newly registered hotels can also opt in by submitting their declaration within 15 days of receiving their GST registration certificate.
For hotel chains or groups operating multiple properties under a single GST registration, each premise is treated separately for GST classification purposes. The 18% GST on restaurant services will apply only to those properties where:
This ensures fairness in taxation across diverse properties with varying room tariffs.
The CBIC’s revised framework aims to simplify and bring clarity to the taxation of hotel restaurant services. With defined criteria and options for voluntary classification, hoteliers can make informed decisions for each property.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Apr 3, 2025, 5:49 PM IST
Team Angel One
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