GST ITC on Hotel room accomodation

Hi, one of my client engagement in the business hotel room accomodation services. Currently he has taken a property on lease and listed it on oyo for room accomodation services, he charges 12% GST on bills. Oyo charges 35% commission plus 18% GST on it, also he pays 18% GST on lease rent. But after 56th GST council meeting he fall under 5% GST without ITC. My queries are

A. Whats treatment of existing ITC.

B. Is he liable to pay GST RCM on rent (as he can't avail its ITC)

Replies (2)
Quick Summary
Hotel leasing property for Oyo rooms now under 5% GST no ITC post-56th meeting. Existing ITC must be reversed/adjusted. Still pay 18% GST on lease rent (forward charge), but can't claim ITC.

Your business (hotel room accommodation services) falls under the 5% GST rate without Input Tax Credit (ITC). The treatment of existing ITC (Input Tax Credit) accumulated before this change would typically need to be reversed or adjusted as per GST rules when the taxpayer moves to a scheme where ITC is not available. The client may need to reverse the ITC attributable to the stock of inputs, input services, and capital goods as on the date of transition to the 5% GST rate without ITC.

The client pays 18% GST on lease rent. If the client can not avail ITC under the new 5% GST rate without ITC scheme, they still need to pay GST on the leave rent under the Reverse Charge Mechanism (RCM) if the landlord is not registered under GST or if the service is eligible for RCM. However, since the client is paying 18% GST on lease rent (implying the landlord is registered and charging GST), the client would be paying this GST and earlier could have claimed ITC. Now , under 5% GST without ITC, the client can not claim ITC on this GST paid on lease rent. 

After GST 2.0 (effective September 22, 2025), hotel accommodation is at 5% GST but WITHOUT ITC eligibility.

Key rule: Section 17(5)(b)(i) of CGST Act blocks ITC on food and accommodation services in most cases. This applied even at old 12%/18% rates, and continues at 5%.

For businesses booking rooms for employees or business travel: the GST paid on hotel bills is a COST, not a credit. ITC cannot be claimed. You can, however, claim the hotel bill as a legitimate business expense for income tax purposes.

Narrow exception: Tour operators and hospitality businesses using hotel rooms as part of their own taxable output service may claim ITC on those specific inputs. This is a B2B supply exception, not available to most companies.

Practical check: If your company books hotels via a corporate travel portal, ensure the bills show a valid GSTIN and the hotel charges 5% GST. This helps with proper accounting even if ITC is blocked.

This [GST ITC tracking guide](https://taxgarden.in/blog/multiple-gstins-track-income-expenses-itc-guide-2026) covers how to identify blocked credits and keep your ITC ledger accurate.

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