To simplify compliance, the Central Board of Indirect Taxes and Customs (CBIC) released frequently asked questions (FAQs) on Thursday. The FAQs clarify that hotels charging a room rent above ₹7,500 a day at any time in any financial year will be considered “specified premises.” Consequently, restaurant services provided inside such premises will attract an 18% Goods and Services Tax (GST) with input tax credit.
Hotels have the option to voluntarily classify themselves as specified premises if the room rent does not exceed ₹7,500 in the previous financial year. This declaration remains valid until the hotel opts out, streamlining the process and eliminating the need for annual filings. It is important to note that separate declarations are required for each premise. For restaurants situated outside specified premises, the GST rate is set at 5% without the possibility of input tax credit (ITC).
Following recommendations from the 55th GST Council meeting, the CBIC announced amendments to the definition of “specified premises” for hotel services, effective from April 1, 2025.
“The changes aim to link the GST rate to the actual value of accommodation provided, with GST applicable on restaurant services in hotels based on accommodation rates,” stated Saurabh Agarwal, tax partner at EY. The modifications have been introduced to replace the concept of “declared tariff” with “value of supply,” aligning with the dynamic pricing model in the hotel industry. This change offers hotel service providers the flexibility to declare their premises as “specified premises,” Agarwal added.