18% GST hits hotel restaurants where room tariff exceeds Rs 7,500 per day; check details

According to the latest guidelines from the Central Board of Indirect Taxes and Customs (CBIC), hotels that charge more than Rs 7,500 per day for their rooms will be considered 'specified premises'. Such hotels will be subject to an 18% GST rate for their restaurant services, along with input tax credit (ITC). Restaurants located outside of specified premises will be subject to a 5% GST rate without ITC.

Under the new regulations, hotels have the option to choose the 'specified premises' classification if their room tariff was below Rs 7,500 in the previous fiscal year. Once this declaration is made, it will remain valid until the establishment chooses to opt out. This process has been streamlined to eliminate the need for annual filings. Each premises will require a separate declaration.

In a recent post, Efiletax noted: "We decoded all 28 official FAQs into 1 table. No jargon. Just straight answers: Who should file Annexure VIII; What qualifies as “Specified Premises”. What to do if room rent falls below ₹7500."

What are the specified premises?

According to the updated guidelines, 'specified premises' are defined as hotels or properties with a daily room rate of over Rs 7,500 in the preceding fiscal year. Such establishments will be required to pay the increased GST rate on restaurant services.

Can Hotels Opt to Be Categorized as ‘Specified Premises’?

Yes, hoteliers have the option to voluntarily categorize their properties as “specified premises” by submitting a declaration between January 1 and March 31 of the previous financial year. This new classification replaces the previous concept of ‘declared tariff,’ which took into account all amenities provided in the accommodation unit, such as furniture, air conditioning, and refrigerators, while excluding any discounts on published rates.

What GST Rate Applies to Other Restaurant Services?

For restaurant services offered outside of “specified premises,” a reduced GST rate of 5% will still be applicable. However, it is important to note that this lower rate does not include input tax credit (ITC).

How Is ‘Specified Premises’ Status Determined?
The CBIC clarified that a hotel’s status as a “specified premises” for a financial year will be based on:- 

The actual transaction value of hotel accommodations in the previous financial year. The CBIC has clarified that a hotel's classification as a "specified premises" for a financial year will be determined by the actual transaction value of hotel accommodations in the previous financial year and by a voluntary declaration from the hotelier before the new financial year begins.

Once designated as a "specified premises," this classification will remain unchanged throughout the financial year. Hotels that surpassed the Rs 7,500 per night threshold in 2024-25 will automatically be subject to an 18% GST rate on restaurant services for 2025-26.

Newly registered hotels have the option to opt for "specified premises" status by submitting an opt-in declaration within 15 days of obtaining GST registration.

How Will GST Be Applied to Hotels with Multiple Properties?

For hotel groups with multiple properties operating under a single GST registration, each individual premise will be assessed separately for the application of GST. The higher 18% GST rate will apply only to those properties where room rates exceeded ₹7,500 in the previous year or were voluntarily declared as “specified premises.”