Under the current GST rules for hotels in India (effective 22 September 2025): accommodation below ₹1,000/night is Nil-rated; ₹1,000–₹7,500 attracts 5% GST with no ITC; and above ₹7,500 attracts 18% GST with full ITC. Restaurant services (including in-room dining) are taxed at 5% with no ITC in a “non-specified premises,” or 18% with ITC in a “specified premises” — a hotel where any room tariff exceeded ₹7,500 in the previous financial year. Banquet halls and catering remain at 18% GST with ITC. Alcohol stays outside GST.
1️⃣ Type of Supply in Hotel Industry
Understanding the classification of services is crucial for correct GST application. Here's how different hotel services are categorized:
Accommodation
Classification: Service
Room rentals and lodging facilities
Restaurant / Dining
Classification: Service
Food service including room dining
Banquet / Conference
Classification: Service
Event spaces and meeting halls
Catering
Classification: Service
Indoor and outdoor catering services
Laundry / Spa / Gym
Classification: Service
Guest amenities and facilities, generally taxed at 18%
Packaged Food Sale
Classification: Goods
Pre-packaged food items
Alcohol
Classification: Outside GST
Subject to state excise duties
2️⃣ GST Rate Structure for Hotels (Effective 22 September 2025)
Room Accommodation (Per Day Per Unit)
| Room Tariff / Value of Supply | GST Rate | ITC Status |
|---|---|---|
| Below ₹1,000 | NIL (0%) | Not Applicable |
| ₹1,000 – ₹7,500 | 5% | ✗ ITC Not Allowed |
| Above ₹7,500 | 18% | ✓ ITC Allowed |
Restaurant Services (Including Room Dining) — Depends on "Specified Premises" Status
🏨 What is a "Specified Premises"?
A hotel is a "specified premises" if the value of supply of any unit of accommodation exceeded ₹7,500 per night at any point in the preceding financial year. A hotel can also voluntarily opt in as a specified premises through a formal declaration filed with the GST department. This classification, not the star rating, determines the restaurant GST rate for the entire property for the current financial year.
Non-Specified Premises
All rooms priced ₹7,500 or below in the previous FY.
Restaurant GST Rate: 5%
ITC Status: ✗ Not Allowed
Specified Premises
At least one room priced above ₹7,500 in the previous FY (or voluntarily opted in).
Restaurant GST Rate: 18%
ITC Status: ✓ Allowed
Banquet / Marriage Hall
📌 Important
GST Rate: 18%
ITC Status: ✓ Allowed
Banquet halls and conference facilities qualify for input tax credit.
Catering (Indoor / Outdoor)
📌 Important
GST Rate: 18%
ITC Status: ✓ Allowed
Both indoor and outdoor catering services are eligible for ITC.
3️⃣ Time of Supply (TOS)
Understanding when GST becomes payable is critical for compliance:
Accommodation
TOS: Earlier of Invoice or Payment
GST payable when invoice is issued or payment is received, whichever is earlier
Advance Booking
TOS: GST Payable on Advance
When advance payment is received for future bookings
Restaurant
TOS: Invoice / Payment
At the time of billing or payment receipt
Banquet
TOS: Invoice / Milestone / Payment
Based on invoice, completion milestones, or payment received
4️⃣ Place of Supply (POS)
The location where the supply is deemed to take place affects GST applicability:
🏨 For Accommodation / Restaurant / Banquet
Place of Supply: Location of Hotel (Immovable Property)
- ✓ CGST + SGST applicable (if supply within state)
- ✗ IGST NOT applicable (even if guest is from another state)
Example: If a guest from Maharashtra stays in a hotel in Bangalore, the hotel will charge CGST + SGST (Karnataka), not IGST.
5️⃣ Input Tax Credit (ITC) - Eligibility
Not all expenses qualify for Input Tax Credit, and eligibility now hinges on which rate slab applies. Here's the complete breakdown:
✓ ITC ALLOWED ON
- Rooms taxed at 18% (tariff above ₹7,500)
- Restaurant services in a specified premises (18%)
- Banquet and catering services (18%)
- Housekeeping material, repairs & maintenance
- Security services
- OTA Commission (Online Travel Agents)
- Furniture, kitchen equipment
✗ ITC NOT ALLOWED ON
- Rooms taxed at 5% (tariff ₹1,000–₹7,500)
- Restaurant services in a non-specified premises (5%)
- Alcohol purchases
- Personal consumption
- Free complimentary items
6️⃣ Reverse Charge Mechanism (RCM) Applicable
Under certain circumstances, the recipient (hotel) is liable to pay GST instead of the supplier:
- GTA Services: Goods Transport Agency services
- Legal Services (Advocate): Professional legal consultancy
- Security Services (Company / LLP): Corporate security service providers
- Director Services (Non-salary): Director fees paid to independent directors
- Sponsorship Services: Corporate sponsorship arrangements
- Renting of Motor Vehicle: Vehicle rental without operator
💡 What is RCM?
Reverse Charge Mechanism (RCM) is a system where the recipient of goods or services is liable to pay GST instead of the supplier. The hotel must self-assess and pay GST on these services directly to the government.
7️⃣ Exemptions Under GST
Certain supplies in the hotel industry are exempt (Nil-rated) from GST:
- Accommodation below ₹1,000 per day: Budget accommodations are Nil-rated under GST
- Alcohol for human consumption: Outside GST scope (subject to state excise duties and VAT)
- Sale of completed property: Sale of hotel buildings after completion certificate
8️⃣ Ideal Compliance Practices
Follow these best practices to ensure smooth GST compliance in your hotel business:
Separate Invoicing
✓ Best Practice: Issue Separate Invoices For:
- Room: Accommodation charges (Nil, 5%, or 18% depending on tariff)
- Restaurant: Food & beverage (5% or 18% depending on specified premises status)
- Banquet: Event space rental (18%, ITC allowed)
- Catering: Catering services (18%, ITC allowed)
Why? Different GST rates and ITC eligibility apply to different services. Separate invoicing ensures accuracy and helps guests claim appropriate ITC.
Specified Premises Declaration
🔍 Track Your Classification Annually
- Review whether any room tariff exceeded ₹7,500 in the previous financial year
- File a voluntary declaration if opting to be treated as a specified premises
- Communicate your current classification clearly to F&B teams for correct billing
- Reassess classification at the start of each financial year
ITC Segregation
🔍 Maintain Clear Records
- Segregate common costs between ITC eligible (18% slab) and non-eligible (5%/Nil slab) services
- Use proportionate reversal method under Rule 42/43 for shared expenses
- Maintain separate accounts for restaurant operations by applicable rate
- Document all ITC claims with proper invoices
RCM Tracking
✓ Track Reverse Charge Transactions
- Maintain separate register for RCM transactions
- Ensure timely payment of RCM GST
- File GSTR-3B with RCM details accurately
- Reconcile RCM payments monthly
Alcohol Turnover Excluded from GSTR
📊 Summary Table: GST Rates at a Glance (2026)
| Service Type | GST Rate | ITC Allowed? | Notes |
|---|---|---|---|
| Room (Below ₹1,000) | Nil | N/A | No GST applicable |
| Room (₹1,000–₹7,500) | 5% | No | Replaced the earlier 12% slab |
| Room (Above ₹7,500) | 18% | Yes | Property becomes a "specified premises" |
| Restaurant (non-specified premises) | 5% | No | Including room service |
| Restaurant (specified premises) | 18% | Yes | Including room service |
| Banquet Hall | 18% | Yes | Event spaces |
| Catering Services | 18% | Yes | Indoor/outdoor |
| Alcohol | Outside GST | N/A | State excise applicable |
❓ Frequently Asked Questions
Q1: Can I claim ITC on restaurant expenses?
Answer: Only if your hotel is a "specified premises" (restaurant taxed at 18%). If your hotel is a non-specified premises (restaurant taxed at 5%), ITC is not allowed even if you're a registered business.
Q2: What if my hotel room tariff varies by season?
Answer: GST rate applies based on the actual value of supply for each booking. If off-season rate is ₹900 (Nil) and peak season is ₹8,000 (18%), apply the rate accordingly for each booking. Note that whether your restaurant is taxed at 5% or 18% for the whole financial year depends on your "specified premises" status based on the previous year's tariffs, not the current booking.
Q3: Do I charge IGST for guests from other states?
Answer: No. Since hotel services are linked to immovable property (location), you always charge CGST + SGST based on your hotel's location, regardless of where the guest is from.
Q4: How do I handle complimentary breakfast in room packages?
Answer: If breakfast is bundled with room tariff as a composite supply, the entire package generally takes the room's GST rate. If charged separately, the applicable restaurant rate (5% or 18%, based on specified premises status) applies. Best practice: issue separate invoices for clarity.
Q5: Is GST applicable on advance bookings?
Answer: Yes, GST is payable when you receive advance payment for future bookings. The time of supply is when advance is received.
Q6: Do I need to charge GST on OTA commissions I pay?
Answer: Yes, OTA (Online Travel Agent) charges you pay are subject to GST, and you can claim ITC on these expenses as they are for business purposes, subject to your overall ITC eligibility.
💼 Common Compliance Mistakes to Avoid
Wrong Rate Application
Applying the old 12% slab, which no longer exists. Always verify the actual value of supply charged to the guest against the current Nil/5%/18% structure.
Mixed Invoicing
Clubbing room, restaurant, and banquet charges in one invoice creates ITC complications for guests.
Specified Premises Errors
Failing to reassess "specified premises" status each financial year, leading to the wrong restaurant GST rate being applied all year.
RCM Delays
Not paying RCM GST on time for services like legal, security, and GTA services.
Poor Record Keeping
Not maintaining separate records for alcohol sales, exempted services, and ITC-eligible expenses.
Alcohol in GSTR
Including alcohol revenue in GST turnover (it should be excluded as it's outside GST).
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📚 Additional Resources
🧾 GST Rate Rationalization Guide
Full breakdown of the GST 2.0 slab changes across all sectors
Read Guide →