Hello everyone,
We work with multiple hotel clients across India, and we are looking for clarity on the recent GST amendment effective 22nd September 2025.
As per the new provision, hotel accommodation services where the room tariff is below ₹7,500/day are taxed at 5% GST without ITC.
Our clients are concerned about the impact on input tax credit (ITC), especially on RCM for rent and other operating expenses. Here’s an illustrative example to show the issue:
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Rent paid to landlord: ₹25,00,000/month (18% RCM – Unregistered owner of multiple hotel units)
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Room revenue: ₹25,00,000/month (5% GST, no ITC, tariff < ₹7,500/day)
Resulting GST impact:
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GST collected from guests: ₹1,25,000
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RCM GST paid on rent: ₹4,50,000 (cannot claim ITC)
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Net effective GST burden: ₹3,25,000/month (~13% of revenue)
This is much higher than the earlier 12% with ITC scheme, where hotels could set off ITC on rent and inputs.
Our queries to the forum:
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Is there any provision under current GST law to claim ITC on RCM for rent and other inputs when hotels are under the 5% scheme?
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Can hotels voluntarily opt to charge a higher rate (12%/18%) on rooms < ₹7,500 to avail ITC?
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If not, is there any way to pay RCM on rent/inputs at a reduced rate (5% or 12%) instead of 18%?
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Are there recommended steps or clarifications for mid-tier hotels to manage this increased tax burden?
We’d appreciate any guidance or references to official clarifications. This will help hotels plan operations and stay compliant under the new structure.
CAclubindia
