The CBIC on Thursday said hotels renting a room on over Rs 7,500 a day any time in any financial year will be ‘specified premises’ for the subsequent fiscal and restaurant services rendered in such premises will draw 18% GST with input tax credit.
Such restaurants operating within hotels were previously considered non-taxable, However, with effect from April 1, 2025, the taxability of such restaurants shall be on the basis of value of supply (transactional value) and not on the basis of the value of supply deemed made. This will replace the term ‘declared tariff’ as all the charges for amenities provided in the unit of accommodation (on rent for stay), such as furniture, air conditioner, refrigerators and other amenities, would be covered under it alongside any discount offered on the published charges for the unit.
“For determination of whether premise providing hotel accommodation service is mandatary included in ‘specified premises’, in the current FY, the value of supply of hotel accommodation in previous FY, i.e., the transaction value charged for the said supply shall be the basis from the date of commencement from 01.04.2025,” the CBIC said in an FAQ, issued on the subject of ‘Restaurant Service’ supplied at ‘Specified Premises’.
The CBIC has simplified also defined ‘specified premises’ as the premises from where the supplier had provided in the preceding financial year, ‘hotel accommodation’ service exceeding in value of supply of any unit of accommodation Rs 7,500 per unit per day or equivalent.
Restaurant services in such part of hotel units would be automatically charged 18 per cent GST with input tax credit (ITC).
The restaurant services for hotels where the room rent is not more than Rs 7,500/unit/day in the previous financial year will still incur a heavy 5% GST charge with no ITC applicability.
Besides, other hotels wishing to set the room rent above Rs 7,500 from the next fiscal year can submit an ‘opt in’ declaration to the GST authorities anytime between January 1 and March 31 of the ongoing fiscal. New registration application would automatically be approved together with the opt in declaration to be marked within 15 days of acquiring the registration – at which point, the position “specified premises” is claimed.
The CBIC explained that the concept of “declared tariff” is being changed to “value of supply” (i.e. transaction value) in the definition of specified premises as the hotel industry tends to dynamic pricing.
Specified conveys that a premise providing accommodation service can in this fiscal year be considered a subsidized accommodation unit if for the financial year of stand-alone serviced sales of accommodation were below the threshold deemed value of total sales value of accommodation services serviced to units of other services for purpose of ascertaining whether specified premise is reached implies offers serviced to supplied floor limit.
The CBIC also mentioned that it will ‘provide the opportunity to the supplier of hotel accommodation service to proclaim the premises as ‘specified premises’ which allows the restaurants situated in the said premises to avail an 18% tax on ITC on the supply of restaurant service’.
“Experts argued that in order to ease compliance, the CBIC has published FAQs noting how if the value of hotel accommodation surpasses Rs 7500 per day in the preceding FY, the premises shall attract 18 percent GST with ITC. Its mandatory for hotels to opt in if they wish to voluntarily classified under specified premises, if the value does not exceed Rs 7500 in the previous FY, with the declaration remaining until they opt out.
All “Separate declarations need to be made for each premise, while for restaurants located outside specified premises, the GST rate is 5% without ITC,” said one expert.“