GST on restaurant services in hotels will depend on the value of supply of hotel rooms in the previous year.
The 55th GST Council Meeting, held on December 21, 2024, announced significant changes to the regulations overseeing restaurant services in India, set to take effect on April 1, 2025.
Recommendations of the 55th GST Council Meeting
“To omit the definition of declared tariff and suitably amend the definition of specified premises (from the services rate and exemption notifications) to link it with actual value of supply of any unit of accommodation provided by the hotel and to make the rate of GST applicable on restaurant services in such hotels, for a given financial year, dependent upon the ‘value of supply’ of units of accommodation made in the preceding financial year, i.e. 18% with ITC if the ‘value of supply’ exceeded Rs. 7,500 for any unit of accommodation in the preceding financial year, and 5% without ITC otherwise. Further, to give an option to pay tax on restaurant service in hotels at the rate of 18% with ITC, if the hotel so chooses, by giving a declaration to that effect on or before the beginning of the financial year or on obtaining registration. The above changes to be made effective from 01.04.2025 to avoid any transition difficulties.”
Simplification of the above statement:
- The Council proposed the removal of the definition of 'declared tariff' and suggested revising the definition of 'specified premises' to better align GST rates with the actual value of hotel accommodations. This adjustment seeks to ensure that GST rates for restaurant services reflect current room tariffs, promoting transparency and fairness.
- The GST rate applicable to restaurant services in hotels will be determined by the 'value of supply' of each unit of accommodation offered by the hotel in the previous financial year. In particular:
- Suppose the value of supply for any unit of accommodation in the previous financial year was more than ₹7,500. In that case, restaurant services will be subject to an 18% GST rate, along with the option for Input Tax Credit (ITC).
- If the value of supply is ₹7,500 or lower, a 5% GST rate will be applicable without the option for ITC
- Hotels may choose to apply an 18% GST rate on restaurant services, along with the option for input tax credit (ITC), irrespective of room tariffs, by providing a declaration either prior to the start of the financial year or at the time of registration.
GST Rate on Restaurant Services
| Restaurants providing catering services/takeaway/food delivery services | 5% without ITC |
| Restaurants within hotels/outdoor catering within hotels | 5% without ITC |
| Restaurants within hotels if room tariff is less than Rs. 7,500 | 5% without ITC |
| Standalone restaurants (takeaway/outdoor catering services/food delivery services) | 5% without ITC |
| Restaurants within hotels if room tariff is more than or equal to Rs. 7,500 | 18% with ITC |
| Optional for all hotels | Hotels can opt to charge 18% GST on restaurant services regardless of room tariffs by submitting a declaration. |
FAQ’s
The actual value of supply is defined as the true amount charged for accommodation, not taking into account any discounts or stated tariffs. This term replaces the notion of "declared tariff" to offer a clearer and more precise foundation for determining GST.
The GST rate for restaurant services in hotels is determined by the previous financial year. Any changes in tariffs within the current financial year will not impact the rate until it is reassessed in the following year.
The term "declared tariff" frequently led to confusion and inconsistencies, as it did not align with the actual amounts charged due to discounts or promotions. The updated system now guarantees that GST is calculated based on the actual billing amounts.
No, these changes are applicable solely to restaurant services located within hotels. Standalone restaurants will continue to be subject to a 5% GST without input tax credit (ITC).
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