Restaurant Services in Hotels with Room
Restaurant Services in Hotels with Room The Central Board of Indirect Taxes and Customs (CBIC) has issued a significant clarification on the GST rate applicable to restaurant services provided within hotels. Starting April 1, 2025, restaurants operating within hotels that charge room rent above ₹7,500 per day will be subject to 18% GST with input tax credit (ITC).
Restaurant Services in Hotels with Room This update is aimed at ensuring uniformity in tax treatment and simplifying compliance, especially for hotels adopting dynamic pricing models. Let’s dive into the details of this new rule and what it means for hoteliers and restaurateurs.
📌 What Has Changed?
Restaurant Services in Hotels with Room Previously, GST rates for restaurant services within hotels were linked to the declared tariff of rooms — a practice that often led to confusion due to Restaurant Services in Hotels with Room fluctuating published rates and discounts. Restaurant Services in Hotels with Room But from FY 2025–26 (starting April 1, 2025), the declared tariff concept is being replaced by a more transparent and practical metric — “value of supply” (i.e., actual transaction value).
🏨 What are ‘Specified Premises’?
As per CBIC’s new definition, ‘Specified Premises’ refers to any hotel premises where the actual room rent charged was more than ₹7,500 per day/unit at any time in the previous financial year.
✅ Criteria for ‘Specified Premises’:
- If a hotel charged more than ₹7,500/day for any unit of accommodation at any time in FY 2024–25, it will be treated as ‘specified premises’ for the next financial year, i.e., FY 2025–26.
- This classification will be based on actual transaction value (not published rates).
🍽️ GST Rate on Restaurant Services from April 1, 2025
| Hotel Category | Room Rent (in Previous FY) | GST on Restaurant Services | Input Tax Credit (ITC) |
| Specified Premises | > ₹7,500 per unit/day | 18% GST | ✅ Allowed |
| Non-Specified Premises | ≤ ₹7,500 per unit/day | 5% GST | ❌ Not Allowed |
Restaurant Services in Hotels with Room So, if a restaurant is located inside a hotel that meets the ‘specified premises’ criteria, it must charge 18% GST and can avail full input tax credit.
📝 Voluntary Opt-In Option for Hotels
Hotels that did not exceed the ₹7,500 threshold in FY 2024–25 can voluntarily opt in to be treated as ‘specified premises’. Here’s how:
- Opt-In Window: Between January 1 and March 31, 2025
- Validity: Once opted in, the declaration is valid until the hotel opts out.
- New Hotel Registrations: Must file this declaration within 15 days of obtaining GST registration.
⚖️ Why Replace ‘Declared Tariff’ with ‘Value of Supply’?
The hotel industry has largely shifted to dynamic pricing, where room rates change based on season, demand, and occupancy. The ‘declared tariff’ system didn’t reflect the actual value charged and often led to misinterpretation.
By moving to the ‘value of supply’ (actual price charged), the CBIC aims to:
- Improve transparency and fairness.
- Provide certainty and predictability in tax treatment.
- Simplify compliance for businesses.
🧾 Example to Understand the Change:
Suppose a hotel charged ₹8,000 for a room on just a few days in FY 2024–25. Even if the majority of bookings were below ₹7,500, the hotel will still be classified as a ‘specified premise’ for FY 2025–26. Hence, restaurant services provided inside this hotel during FY 2025–26 will attract 18% GST with ITC.
💡 Key Takeaways for Businesses
- Reassess your room pricing strategy for FY 2024–25 — even a single high-value transaction can impact GST treatment next year.
- Consider the benefits of opting in (such as availing ITC) if you’re close to the ₹7,500 threshold.
- Ensure timely declaration if opting in voluntarily or registering a new hotel.
- Train your accounts and GST teams on the transition from declared tariff to transaction value.
📄 FAQs Based on CBIC Clarification
Q1. If a hotel charged ₹7,600 even for a single night in FY 2024–25, will it be considered a specified premise?
👉 Yes. Even one instance of room rent exceeding ₹7,500 makes the hotel a specified premise for the following FY.
Q2. Can restaurants outside hotels continue to charge 5% GST?
👉 Yes. Standalone restaurants and those inside non-specified premises will continue to be taxed at 5% GST without ITC.
Q3. Do hotels need to file the declaration every year?
👉 No. Once opted in, the status remains unless the hotel chooses to opt out.
✍️ Final Thoughts
Restaurant Services in Hotels with Room This CBIC clarification is a big step toward streamlining GST compliance in the hospitality sector. By linking restaurant GST rates to actual room rents of the preceding year, the system becomes more predictable, equitable, and manageable.
Hotels should immediately analyze their room rent trends and plan for the upcoming FY. Restaurant Services in Hotels with Room Failing to do so may lead to compliance issues or missed opportunities to claim input tax credits.
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Sources : https://l1nq.com/FJJVG
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