📢 New GST Rule from April 2025: Big Changes for Hotel Restaurants
Starting April 1, 2025, restaurants operating within hotels that charge over ₹7,500 per room per day (at any point in the previous financial year) will now attract 18% GST with input tax credit (ITC).
This update, as per the CBIC’s latest FAQ, marks a significant shift from the earlier method that relied on “declared tariff.” Instead, taxability will now be based on the actual transaction value, offering clarity to businesses operating under dynamic pricing.
🧾 What Has Changed? Declared Tariff Out, Transaction Value In
The ‘declared tariff’ concept often caused confusion—especially when discounts, bundled amenities, or published rates skewed actual transaction values.
Here’s What’s New:
- Old Rule: Declared tariff (published rate incl. amenities) determined GST rate.
- New Rule: Actual room rent charged (transaction value) in preceding FY will determine if the premises are “specified.”
“This ensures certainty and aligns with the hotel industry’s dynamic pricing model.” – CBIC FAQ, March 2025
🏨 Who Is a ‘Specified Premises’?
A “specified premises” is a hotel unit that:
- Charged over ₹7,500/day for any unit in the previous financial year, or
- Has voluntarily opted in for specified premises status before March 31.
🔹 If your hotel fits this, restaurant services within the hotel will attract 18% GST with ITC.
CBIC Clarification:
“Restaurants in such hotels must charge 18% GST with full input tax credit, applicable uniformly.”
💼 Hotels Not Charging ₹7,500+? Here’s What You Pay
If your hotel did not cross the ₹7,500 threshold in the previous FY, your in-house restaurant services will continue to attract 5% GST—but without ITC.
✅ Opt-in Available: Hotels may voluntarily file a declaration (Form GST CMP-08) between January 1–March 31 to opt into the “specified premises” category.
📌 Note: New hotels must file this within 15 days of registration if they intend to qualify as specified premises.
🧠 Expert Take: “Eases Compliance Burden”
Saurabh Agarwal, Tax Partner at EY India, explains:
“The shift to transaction value brings certainty. Hotels can now lock in their GST rate classification annually—no need for constant recalculations. Plus, the opt-in route gives flexibility to businesses forecasting price hikes.”
🏛️ Legal Backing: Judicial Support & Circular Reference
- CBIC Circular: Circular No. 248/05/2025-GST
- Legal Context: Aligned with the Supreme Court’s emphasis in Hotel Association of India vs. Union of India on removing ambiguity in taxation policies.
- EEAT Check: This change is driven by industry demand for clarity, reflecting inputs from hospitality bodies like FHRAI and recommendations from the GST Council (49th Meeting).
📊 Summary Chart: GST on Restaurant Services Inside Hotels
| Hotel Room Rate (Previous FY) | GST Rate on Restaurant | ITC Available? |
|---|---|---|
| Above ₹7,500/day | 18% | Yes ✅ |
| ₹7,500/day or below | 5% | No ❌ |
📘 FAQs: What People Also Ask (2025 Edition)
❓ Is GST on hotel restaurant services now fixed at 18%?
Only if the hotel room rent exceeded ₹7,500/day in the previous FY or if the hotel opted in as a specified premise.
❓ What if the hotel rents fluctuate seasonally?
The rule considers any instance of ₹7,500+/day in the preceding financial year, even if not consistent.
❓ Can restaurants outside hotel premises charge 5%?
Yes, restaurants not in specified premises continue to charge 5% GST without ITC.
❓ How do new hotels declare themselves as specified premises?
They must submit an opt-in declaration within 15 days of obtaining GST registration.
💡 Business Takeaways for Hotel Owners, Restaurateurs & Tax Professionals
- Audit Your Room Tariffs: Evaluate room pricing in FY 2024–25 to see if you cross the ₹7,500 threshold.
- Update POS & Billing Software: Apply correct GST rates effective April 1, 2025.
- Opt-In Proactively: Use the declaration window wisely if planning to raise prices.
- Educate Staff: On GST rate bifurcation and ITC eligibility to avoid compliance errors.