🏨 CBIC Clarifies GST on Restaurant Services in Premium Hotels
The Central Board of Indirect Taxes and Customs (CBIC) has released a detailed clarification confirming that restaurant services provided within high-end hotels—those charging more than ₹7,500 per room per day—will be subject to 18% GST with input tax credit (ITC) from April 1, 2025.
This clarification, issued via a comprehensive FAQ on March 27, 2025, addresses the evolving pricing practices in the hospitality sector and brings consistency to GST treatment for such restaurant services.
🔄 Declared Tariff Replaced with Transaction Value
One of the key changes is the replacement of the “declared tariff” method with the actual value of supply, also known as transaction value.
Previously, hotels were taxed based on declared tariffs—which included bundled amenities like air-conditioning, furniture, etc.—even if discounts were applied. This often led to ambiguity in rate classification.
Now, under the new rule:
- The actual price charged in the previous financial year (FY) will determine whether the hotel qualifies as a “specified premises.”
- Once classified as specified premises, restaurant services offered within are mandatorily taxed at 18% GST, with the benefit of input tax credit.
🧾 Who Qualifies as a ‘Specified Premises’?
According to the revised definition:
A specified premises refers to any hotel that, in the preceding financial year, charged above ₹7,500 per day for any unit of accommodation.
This classification ensures that such premises automatically fall under the 18% GST slab for their in-house restaurant services.
✅ Hotels below the ₹7,500 threshold continue to attract 5% GST without ITC.
📝 Can Hotels Opt In Voluntarily?
Yes. CBIC has also introduced a voluntary opt-in mechanism:
- Hotels planning to raise room tariffs above ₹7,500 in the upcoming fiscal can opt in as “specified premises.”
- The opt-in declaration must be submitted between January 1 and March 31 of the ongoing financial year.
- For newly registered hotels, the declaration must be filed within 15 days of obtaining GST registration.
This ensures that restaurant services within such hotels can charge 18% GST and avail input tax credit right from the start.
🔍 Why the Change? The Industry’s Shift to Dynamic Pricing
The hospitality industry has largely moved to dynamic pricing models—prices fluctuate based on demand, events, and seasons. This made the earlier declared tariff method outdated and often inaccurate.
By using the actual transaction value from the previous FY, the CBIC aims to:
- Provide certainty in classification,
- Enable fair GST computation, and
- Reduce compliance hassles by making the status fixed for the full financial year.
📌 At a Glance: GST Rates on Restaurant Services
| Hotel Room Rent (Previous FY) | Restaurant GST Rate | Input Tax Credit |
|---|---|---|
| Above ₹7,500/day | 18% | ✅ Yes |
| ₹7,500/day or below | 5% | ❌ No |
✅ Action Points for Hotel Operators & Tax Consultants
- Review FY 2024–25 room tariffs to check eligibility.
- File opt-in declarations if planning rate revisions above ₹7,500.
- Update billing systems to reflect correct GST rates from April 1, 2025.
- Train finance and front desk staff on the new classification system.
- Consult your GST advisor or Efiletax for declaration and compliance support.
📢 Final Words
This move by the CBIC ensures greater transparency, simplifies compliance, and aligns taxation with real-world pricing. For hotels aiming to upgrade their pricing or services, understanding and implementing this rule is crucial.