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Simplifying GST on Hotel, Restaurant & Outdoor Catering Services

CA. Bhavik P. Chudasama , Last updated: 06 April 2024  
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The Indian hospitality and food service industry thrives on providing exceptional experiences, but navigating the complexities of GST can often turn into a back-of-house headache. From budget hotels to luxury accommodations, standalone restaurants to elaborate outdoor catering services, the applicable GST rates and Input Tax Credit (ITC) eligibility vary significantly. This article aims to demystify the GST maze for hoteliers, restaurateurs, and caterers, offering a clear and concise guide to ensure smooth compliance and maximize tax benefits.

Types of Services and Applicable GST Rates

Hotels

  • Hotels (Room Tariff ≤ Rs. 7,500 per day): 12% GST with Input Tax Credit (ITC) available.
  • Luxury Hotels (Room Tariff ≥ Rs. 7,500 per day): 18% GST with ITC available.
Simplifying GST on Hotel, Restaurant and Outdoor Catering Services

Restaurants

  • Standalone Restaurants or Restaurants within Budget Hotels: 5% GST without ITC (composition scheme option available for restaurants with turnover up to Rs. 1.5 crore).
  • Restaurants within Hotels (Room Tariff > Rs. 7,500 per day): 18% GST with ITC available.
 

Outdoor Catering Services

  • Standalone or within Budget Hotels: 5% GST without ITC (composition scheme option available with turnover restrictions).
  • Within Hotels (Room Tariff > Rs. 7,500 per day): 18% GST with ITC available.

Understanding Input Tax Credit (ITC)

ITC allows businesses to claim credit for GST paid on purchases used for providing taxable services. This effectively reduces the overall GST liability. However, the 5% GST rate for standalone restaurants and outdoor catering does not allow ITC claims.

Benefits of opting for the Composition Scheme

  • For restaurants with a turnover below Rs. 1.5 crore, the composition scheme offers a simplified tax filing process with a lower tax rate of 5%.
  • One thing to note here is, in Composition Scheme you cannot collect GST from customer whereas in Normal Scheme you can collect GST from customer.
  • Input Tax Credit is not available to restaurant in both the cases.
  • In simple words, opting for composition scheme it will reduce the Tax Filing compliance compared to normal scheme but GST will have to be borne by Restaurant.
 

Simplified Table of GST Rates

Service Type

Room Tariff (per day)

GST Rate

ITC Eligibility

Hotels

≤ Rs. 7,500

12%

Yes

Luxury Hotels

≥ Rs. 7,500

18%

Yes

Standalone Restaurants

-

5%

No

Restaurants (in Hotels)

> Rs. 7,500

18%

Yes

Standalone Outdoor Catering

-

5%

No

Outdoor Catering (in Hotels)

> Rs. 7,500

18%

Yes

Reference:

  • Notification No. 20/2019-Central Tax (Rate) dated 30th September 2019
  • Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022

Disclaimer: We request readers to seek professional advice before arriving at any decision/conclusion after reading. We are not responsible for any loss arising to anyone after referring and relying on this article. Above views are based on our understanding of the provisions.

The author can also be reached at office.bhavikco@gmail.com

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Published by

CA. Bhavik P. Chudasama
(Practice)
Category GST   Report

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