New change for GST rates applicable to hotels and their restaurant services
As per 55th GST Council Meeting Notifications has also been issued on 16.01.2025
Key Changes:
- Omitting “Declared Tariff”: The existing definition of “declared tariff” will be removed. This likely means that the published tariff will no longer be the sole determinant for GST rates.
- Amending “Specified Premises”: The definition of “specified premises” will be revised to link it to the actual value of supply for accommodation. This means the GST rate will be based on the actual price charged for a room, not just the advertised rate.
New Defination of Specified Premises from 01.04.2025
“Specified premises”, for a financial year, means,-
(a) a 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 seven thousand five hundred rupees per unit per day or equivalent; or
(b) a premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration, on or after the 1st of January and not later than 31st of March of the preceding financial year, declaring the said premises to be a specified premises; or
(c) a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises;”;
Analysis of Above Defination
A “specified premises” for a financial year refers to a hotel that meets any of the following conditions:
- (a) High-Value Accommodation: The hotel provided accommodation in the preceding financial year where the value of any unit (room) exceeded Rs. 7,500 per day or equivalent. This means they catered to a higher-priced segment of the market.
- (b) Declaration by Existing Hotel: An existing registered hotel can declare itself as a “specified premises” by filing a declaration between January 1st and March 31st of the preceding financial year. This gives them the option to choose the 18% GST rate with ITC for their restaurant services, regardless of the actual room value.
- (c) Declaration by New Hotel: A new hotel applying for GST registration can also declare itself as “specified premises” within 15 days of receiving acknowledgment for their registration application. This allows them to opt for the 18% GST rate from the start.
Refer
Notificaiton No. 05/2025- Central Tax (Rate) Dated 16.01.2025 Hotel accommodation service Download
- GST Rate on Restaurant Services: The GST rate for restaurant services within hotels will now depend on the value of accommodation supplied in the preceding financial year.
- If the value of any unit of accommodation exceeded Rs. 7,500 in the previous year, the GST rate on restaurant services will be 18% with Input Tax Credit (ITC) allowed.
- If the value was Rs. 7,500 or less, the rate will be 5% without ITC.
- Optional 18% GST: Hotels can choose to pay 18% GST with ITC on their restaurant services regardless of the value of accommodation, by providing a declaration at the start of the financial year or upon registration. This provides flexibility for businesses that may find it easier to manage a consistent rate.
Notificaiton No. 05/2025- Central Tax (Rate) Dated 16.01.2025 Hotel accommodation service Download
Effective Date:
- These changes are proposed to be effective from April 1, 2025, to avoid transition issues.
Purpose:
- These amendments aim to simplify the GST regime for hotels and restaurants by:
- Linking GST to actual value: This makes the system fairer and more transparent, as the tax rate will reflect the actual price charged to customers.
- Providing flexibility: The option for hotels to choose a consistent 18% GST rate simplifies accounting and compliance.
- Reducing compliance burden: Removing the “declared tariff” concept simplifies the process of determining the applicable GST rate.