What the 18% GST on Dining Means for Your Next Hotel Meal
Planning a meal at a luxury hotel? The new 18% GST dining rule might just inflate your bill.
Starting 1st April 2025, restaurants located inside certain hotels—termed as specified premises—are mandatorily charging 18% GST on dining, as per the latest GST amendment. This marks a significant shift from the earlier 5% GST rate applicable to most restaurants without Input Tax Credit (ITC).
🏨 What Counts as ‘Specified Premises’?
Under Notification No. 05/2025-CT(Rate) dated 1st April 2025:
“Specified premises” refers to hotel properties that provided any room at a value exceeding ₹7,500 per night in the previous financial year.
So, if your hotel charged even one room above ₹7,500, it now qualifies as a “specified premises” and must charge 18% GST on all restaurant services provided.
📅 Declaration Timeline: Opt-In Window for Hotels
Hotels falling into this category had to opt in between January 1 and March 31.
New hotel registrations have a 15-day window to file their opt-in declaration.
| Hotel Type | Dining GST Rate | ITC Available? |
|---|---|---|
| Specified Premises | 18% | Yes ✅ |
| Other Hotels (Optional) | 5% or 18% | No (if 5%) ❌ |
💰 How This Impacts Customers
At first glance, a shift from 5% to 18% GST sounds steep. But here’s the nuance:
- Restaurants in specified premises can now claim ITC on all goods and services used in running the restaurant (furniture, kitchenware, inputs, etc.).
- This may offset part of the GST collected, especially for high-volume or high-input kitchens.
Key Insight:
If a hotel restaurant operates with significant input costs, the tax credit might balance the higher rate—keeping your bill largely unchanged.
📉 When Will Dining Costs Actually Rise?
While ITC helps, markup-heavy or lean-cost restaurants may not generate enough input tax credit to fully offset the 18% GST. In such cases, the customer pays more.
Example:
A high-margin rooftop restaurant in a 5-star hotel may not have enough input costs to balance the tax hike. Hence, your ₹1,000 bill could now be ₹1,180.
📜 Legal Backing & Circular Clarity
As per CBIC Circular No. 248/05/2025-GST, the new structure aligns with:
- Section 9(1) of the CGST Act (for levy of GST on restaurant services).
- Clarifications issued post Finance Bill 2025 amendments.
Case Law Reference:
In DLF Hotels & Hospitality Ltd v. CCE (2023), the Delhi CESTAT emphasized that bundled hotel services must align with declared tariffs and tax applicability—paving the way for uniform treatment of restaurant services in hotels.
🎯 Final Takeaway for Businesses
Hotels and restaurant owners should:
- Evaluate input costs to determine if opting for 18% GST with ITC is beneficial.
- File the opt-in declaration within deadlines.
- Keep transparent tax breakup on bills to avoid confusion with customers.
🧾 For Taxpayers & Diners
If your dining bill at a luxury hotel suddenly seems inflated, check this:
- Was the hotel room rent ever above ₹7,500?
- Is the GST breakup showing 18%?
- Has ITC been factored in (if you’re a business paying for meals)?