Unused ITC for Hotel after GST Change

NO — the old ITC balance cannot be used once the hotel shifts to 5% GST without ITC.
The unutilised ITC must be reversed as per GST law.

Frequently Asked Questions (FAQs) posted by Ministry of Finance on the decisions of the 56th GST Council held in New Delhi, stated in Question No. 8 that "The GST rate has been reduced on my outward supply of goods/services made on or after 22nd September, 2025 but I already have ITC of GST in ledger that accrued on account of higher rate. Can I continue to use such credit?"

Answer : The input tax credit once duly availed in e-credit ledger can be used for discharge of any output tax liability in terms of provisions of section 49(4) of CGST Act and rules made thereunder.

As Hotel Room Charges arent exempted from GST, we can discharge the output tax liablities from previous accumulated e-credit. Attaching the link for reference.

FAQs on GST Change

Yes, only if the hotel continues to have:

Restaurant @ 18%

Banquet / conference services with ITC

Any other taxable outward supply eligible for ITC

If all supplies are 5% without ITC, accumulated credit becomes blocked from utilisation, though not forcibly reversed (except capital goods).

Thanks for the clarification. Just need an example for better clarification.

Let's say Room Charges @ 5% (no ITC), Restaurant @ 5% (no ITC), Banquet @ 18% (ITC), Cab Charges @ 18%(ITC). So we can offset all the GST Liabilities if some services are under ITC and some don't OR Apportionment of ITC needs to be done.