How will GST affect restaurants and hotels?

How will GST affect restaurants and hotels?


Ritul Patwa

Ritul Patwa

371 week ago — 4 min read

The GST Council has announced following fitment rate on Hotels and Restaurants under Goods and Services Tax (GST). The information is being uploaded immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes:


1. Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes

  • Declared Room Tariff upto Rs. 999/- NIL (No ITC Credit)
  • Room Tariff from 1000/- to Rs. 2499/- 12% (Full ITC Credit is allowed)
  • Room Tariff from 2500/- to Rs. 4999/- 18%
  • Room Rent is Rs. 5000/- or more- 28%
  • 5 star and above Rated Hotels- 28%


Commentary by author: The GST Council has used three different terminologies viz. (1) Declared Room Tariff; (2) Room Tariff and (3) Room Rent for identification of Tax Rate. We are writing a representation to the GST Council to issue a clarification on this issue to avoid interpretational disputes in future.


2. Supply of Food / Drinks in a Restaurant

  • Not having (i) Air Conditioning; or (ii) Central Heating; or (iii) License to Serve Liquor- 12% (Full ITC Credit is allowed)
  • Having License to serve Liquor- 18%
  • Having Air Conditioning or Central Heating- 18%
  • 5 star and above Rated Hotels with Air Conditioning in Restaurant- 28%


Commentary by author: In our view, in case of a 5 Star and above rated hotels where the food is served in a venue without Air Conditioning (like open area, dunes, lakeside etc) and there is a specific mention of this fact on the Bill/ Invoice then it should not be not be covered under the 28% Rate of GST.


3. Supply of Food / Drinks in Outdoor Catering- 18% Full ITC Credit is allowed


4. Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention centre, club, pandal, shamiana or any other place, specially arranged for organising a function) together with renting of such premises- 18%  (Full ITC Credit is allowed)


5. Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go rounds, go-carting, casinos, race-course, ballet, any sporting event such as IPL and the like - 28%(Full ITC Credit is allowed)


6. Supply of tour operators’ services- 5% (No ITC Credit)


7. Renting of motorcab (If fuel cost is borne by the service recipient, then 18% GST will apply)- 5% (No ITC Credit)


8. All other services not specified elsewhere including other MOD Sales- 18% (Full ITC Credit is allowed)


9. Composition Scheme for Turnover upto Rs. 50 Lakhs- 5% (No ITC Credit)

On supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.


Commentary by author: Small Taxpayer opting for payment of tax under the Composition Scheme must review before opting, that they comply with the eligibility criterion mentioned under Section 10 (2) of the Central GST Act, 2017 or similar provisions under the respective State GST Act including (but not limited to) restriction on Interstate Sale and sale through E-Commerce Operator.

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