Introduction: Why GST on Hotels & Restaurants Matters for Tourism?
Tourism is a significant contributor to India’s economy, and clean, well-maintained hotels and restaurants play a crucial role in attracting travelers. However, the Goods and Services Tax (GST) structure on hotel accommodations and restaurant services has undergone multiple changes over the years, affecting pricing, profitability, and compliance for businesses.
In this guide, we break down the latest GST rates on hotels and restaurants, including the impact of Notification No. 5/2025-CTR dated 16.01.2025, and clarify whether standalone restaurants can opt for 18% GST with Input Tax Credit (ITC) or not.
1. GST Rates on Hotel Accommodation: Key Changes
1.1 How is GST on Hotels Calculated?
The GST rate on hotel accommodation depends on the actual amount charged per room per day, rather than the declared tariff. This change was introduced on 1st October 2019 through Notification No. 20/2019-CTR.
1.2 Current GST Rates on Hotel Rooms (Effective 18.07.2022)
| Room Tariff (per day per room) | GST Rate |
|---|---|
| Up to ₹1,000 | No exemption (GST applicable) |
| Up to ₹7,500 | 12% GST |
| Above ₹7,500 | 18% GST |
Previously, rooms priced below ₹1,000 per day were exempt, but this exemption was removed on 18th July 2022 through Notification No. 4/2022-CTR.
2. GST Rates on Restaurants: Hotels vs Standalone Restaurants
2.1 Pre-2019 GST Structure
Before Notification No. 20/2019-CTR (30.09.2019), restaurants inside hotels were taxed based on the declared tariff of hotel rooms. However, after 1st October 2019, GST on restaurants inside hotels continued to depend on declared tariff, unlike hotel rooms.
2.2 Current GST Structure for Restaurants
| Type of Restaurant | GST Rate | Input Tax Credit (ITC) Eligibility |
|---|---|---|
| Restaurants inside hotels where room tariff exceeds ₹7,500/day (“Specified Premises”) | 18% GST | ✅ Eligible for ITC |
| Restaurants inside hotels where room tariff is below ₹7,500/day | 5% GST | ❌ No ITC |
| Standalone restaurants (not located in hotels) | 5% GST | ❌ No ITC |
3. Impact of Notification No. 5/2025-CTR (16.01.2025)
3.1 Defining “Specified Premises” for GST Rate Selection
The latest Notification No. 5/2025-CTR provides clarity on which premises qualify as “specified premises” and can charge 18% GST with ITC.
To be considered a specified premises, a restaurant must meet any one of the following conditions:
- The hotel has previously charged ₹7,500+ per room/day in the preceding financial year.
- The hotel has voluntarily declared itself as a specified premises by filing a declaration between January 1st and March 31st of the preceding financial year.
- A newly registered hotel has declared itself as a specified premises within 15 days of GST registration acknowledgment.
3.2 Can Standalone Restaurants Opt for 18% GST?
A major question arises: Can standalone restaurants (not inside hotels) choose 18% GST with ITC?
👉 No, standalone restaurants CANNOT opt for 18% GST with ITC.
- Notification No. 5/2025-CTR makes it clear that only hotel accommodation providers can file the required declaration to opt for 18% GST.
- Annexure-VII (for opting into 18% GST) can only be filed by hotels offering accommodation services.
- Annexure-IX (for opting out of 18% GST) also applies only to hotel accommodation providers with restaurant services, not standalone restaurants.
Thus, existing and newly registered standalone restaurants must continue paying 5% GST without ITC.
4. Summary of GST Rate Implications on Hotels & Restaurants
| Category | GST Rate | Input Tax Credit (ITC) Available? |
|---|---|---|
| Hotel rooms (₹1,000 or less per day) | Taxable (No Exemption) | ✅ Yes |
| Hotel rooms (₹1,001 to ₹7,500 per day) | 12% GST | ✅ Yes |
| Hotel rooms (Above ₹7,500 per day) | 18% GST | ✅ Yes |
| Restaurant inside hotel (hotel room tariff ₹7,500+) | 18% GST | ✅ Yes |
| Restaurant inside hotel (hotel room tariff below ₹7,500) | 5% GST | ❌ No |
| Standalone restaurants (not in hotels) | 5% GST | ❌ No |
5. Conclusion: Key Takeaways for Businesses
- GST on hotel accommodation varies between 12% and 18% based on the actual price charged per room per day, not declared tariff.
- Standalone restaurants must continue paying 5% GST without ITC, as they are not covered under the “specified premises” category.
- Restaurants inside hotels can charge 18% GST with ITC only if the hotel meets the “specified premises” criteria.
- Notification No. 5/2025-CTR confirms that standalone restaurants CANNOT file declarations for 18% GST eligibility.
- Before making tax-related business decisions, hotels and restaurants should carefully review GST notifications and file declarations on time.
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