Effective April 1, 2025, the Central Board of Indirect Taxes and Customs (CBIC) has introduced significant amendments to the Goods and Services Tax (GST) framework concerning restaurant services within hotels. These changes primarily affect establishments where the room rent exceeds ₹7,500 per day. Let’s delve into the specifics and understand the implications for both hoteliers and patrons.
Understanding the New GST Framework for Hotels Above ₹7,500/Night
The CBIC’s recent clarification outlines that restaurant services provided within hotels—termed “specified premises”—with room tariffs exceeding ₹7,500 per day will now attract an 18% GST, inclusive of input tax credit (ITC). This marks a departure from the previous structure, aiming to streamline taxation in the hospitality sector.
Defining ‘Specified Premises’ in the Context of GST
“Specified premises” refer to hotels or accommodations where the value of supply for any unit surpassed ₹7,500 per day in the preceding financial year. This definition is pivotal in determining the applicable GST rate for associated restaurant services.
Voluntary Declaration: Can Hoteliers Opt-In as ‘Specified Premises’?
Yes, hoteliers have the option to voluntarily declare their establishments as “specified premises.” This declaration must be filed between January 1 and March 31 of the preceding financial year. By doing so, hotels can opt to apply the 18% GST rate with ITC for their restaurant services, even if their room tariffs do not exceed the ₹7,500 threshold.
GST Rates for Restaurant Services Outside ‘Specified Premises’
For restaurant services offered in hotels where room rents do not exceed ₹7,500 per day, a lower GST rate of 5% applies. However, it’s important to note that this rate does not permit the benefit of ITC.
Stability of ‘Specified Premises’ Status Throughout the Financial Year
Once a hotel’s status as ‘specified premises’ is established—either through meeting the financial threshold or via voluntary declaration—it remains fixed for the entire financial year. This status cannot be altered during the year, providing consistency in tax obligations and compliance.
Implications for New Registrations and Multi-Premise Operations
Hotels seeking new GST registration must submit an opt-in declaration within 15 days of obtaining their registration, declaring their premises as ‘specified.’ For establishments operating multiple premises under a single GST registration, each location will be assessed individually. Only those exceeding the ₹7,500 threshold or those declared as “specified” will attract the 18% GST rate for restaurant services.
Expert Insights on the Revised GST Structure
Saurabh Agarwal, Tax Partner at EY, emphasizes that the CBIC’s FAQs aim to simplify compliance. He notes that if the value of hotel accommodation exceeds ₹7,500 per day in the preceding financial year, the premises will be subject to 18% GST with ITC. Hotels can voluntarily opt for ‘specified premises’ classification if the value doesn’t exceed ₹7,500, with the declaration remaining valid until they choose to opt out.
Conclusion: Navigating the New GST Landscape for Hotels Above ₹7,500/Night
The CBIC’s clarification introduces a structured approach to GST application in the hospitality sector, particularly affecting hotels with room rents exceeding ₹7,500 per day. By understanding these changes, hoteliers can ensure compliance, and patrons can be better informed about the tax components of their bills. As the implementation date approaches, staying abreast of these developments will be crucial for all stakeholders in the hospitality industry.
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