Poojitha Raam Vinay
From April 1, 2025 restaurants inside hotels will have to charge 18% GST from customers instead of 5% previously if the said restaurant satisfied the definition of 'specified premises'.
However, restaurants who do not satisfy this definition of specified premises have an option to either charge 18% GST or 5% from customers.
Specified Premises
As per Notification No. 05/2025-CT(Rate) dated 1st April 2025: “Specified premises” refers to hotel properties that provide any room at a value exceeding ₹7,500 per night in the previous financial year.
Hotels where any room was charged above ₹7,500 per night in the previous financial year are now classified as "specified premises."
Restaurants within these hotels must charge 18% GST on dining services. However, they are eligible to claim Input Tax Credit (ITC), which can offset some of their tax liabilities .
It voluntarily declares itself as a ‘specified premises’ before March 31.
Non-Specified Premises
Hotels where no room exceeded ₹7,500 per night in the previous financial year are not classified as specified premises. Restaurants in these hotels can choose to:
- Continue charging 5% GST without ITC, or
- Opt into the 18% GST regime with ITC by declaring their premises as specified .
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Declarations
Newly registering hotels must declare their status within 15 days of registration. This declaration allows restaurants within these hotels to avail of input tax credit, potentially balancing the increased GST rate for consumers.
Hotels already in the category of specified category had to opt in between January 1 and March 31.
Once a hotel becomes a ‘specified premises,’ it stays that way until it opts out—no yearly reclassification needed.
Impact on ITC
| Hotel Category | GST Rate | ITC Availability |
| Hotels under category Specified Premises | 18% | Yes available |
| Hotels not under Specified Premises | Has option to choose either 18% or 5% | ITC is available if the Hotels opt 18% GST rate |
Impact on Diners
Dining at restaurants within specified premises will now attract a higher GST rate of 18%, potentially increasing the overall bill.
Mid-range and budget hotels, where no room crosses this price, will keep charging 5% GST on food, but they won’t get ITC benefits.
However, since these restaurants can claim ITC, some may adjust their pricing strategies to mitigate the impact on customers. The actual effect on dining costs will vary depending on the restaurant's operational efficiencies and pricing policies .
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