Hotel

 

 

1.1 Introduction

 

 

Goods and Services Tax (GST) is applicable to the hospitality sector including hotels, lodges, guest houses, and restaurants, depending upon the nature of service and the value of supply. Under GST, the tax rates for accommodation services are primarily based on the declared tariff or actual room rent per day, while restaurant services are taxed based on the type of establishment and the availability of input tax credit (ITC). Luxury hotels, budget lodges, air-conditioned restaurants, and non-AC dhabas — all fall under different slabs and conditions. The goal of GST in this sector is to bring uniformity, ensure transparency, and reduce cascading of taxes. However, businesses must carefully analyse notifications, exemptions, reverse charge provisions, and rate changes to ensure full compliance.

 

1.2 Taxability according to Notification No. 11/2017 – Central Tax (Rate) amendment by

 

Notification No. 46/2017 – Central Tax (Rate)

Notification No. 47/2017 – Central Tax (Rate)

Notification No. 13/2018 – Central Tax (Rate)

Notification No. 27/2018 – Central Tax (Rate)

Notification No. 20/2019 – Central Tax (Rate)

Notification No. 03/2022 – Central Tax (Rate)

Notification No. 05/2025 – Central Tax (Rate) (Annexure)

 

Initially, the rate of GST on restaurant services was 18% or 12%, with the benefit of Input Tax Credit (ITC) available to the service providers. (As per Entry No. 7 of Notification No. 11/2017 – Central Tax (Rate). However, in order to simplify compliance and reduce the tax burden on end consumers, the GST Council later revised the rate. At present, the GST on restaurant services is 5%, but without the benefit of ITC on goods and services used in providing such services. This move aimed to bring more uniformity and affordability in the restaurant sector.

 

As per Entry No. 7 of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 amended by above notifications and the updated content is as under: -

 

 

S.No.	Heading	Description of Service	Rate (%)	Condition
7	Heading 9963 (Accommodation, food and beverage services)	(i) Supply of ‘hotel accommodation’ having value of supply of a unit of accommodation less than or equal to seven thousand five hundred rupees per unit per day or equivalent.	12	-
		(ii) Supply of ‘restaurant service’ other than at ‘specified premises	5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
		(iii) Supply of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms.	5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
		(iv) Supply of ‘outdoor catering’, at premises other than ‘specified premises’ provided by any person other than- (a) suppliers providing ‘hotel accommodation’ at ‘specified premises’, or (b) suppliers located in ‘specified premises’.	5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)]
		(v) Composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) at premises other than ‘specified premises’ provided by any person other than- (a) suppliers providing ‘hotel accommodation’ at ‘specified premises’, or (b) suppliers located in ‘specified premises’.	5	Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation (iv)]
		(vi) Accommodation, food and beverage services other than (i) to (v) above Explanation: (a) For the removal of doubt, it is hereby clarified that, supplies covered by items (ii), (iii), (iv) and (v) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5), which is a mandatory rate and shall not be levied at the rate as specified under this entry. (b) This entry covers supply of ‘restaurant service’ at ‘specified premises’ (c) This entry covers supply of ‘hotel accommodation’ having value of supply of a unit of accommodation above 7500 (seven thousand five hundred rupees) per unit per day or equivalent. (d) This entry covers supply of ‘outdoor catering’, provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’. (e) This entry covers composite supply of ‘outdoor catering’ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) provided by suppliers providing ‘hotel accommodation’ at ‘specified premises’, or suppliers located in ‘specified premises’.	18	-

 

 

1.3 What do you mean by Hotel Accommodation

 

As defined under explanation 4(xxxiv) of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 which was amended by Notification No. 20/2019- Central Tax (Rate)

 

Hotel accommodation means

supply, by way of accommodation

in hotels, inns, guest houses, clubs, campsites or other commercial places

meant for residential or lodging purposes

including the supply of time share usage rights by way of accommodation.

 

1.4 What do you mean by Restaurant service

 

As defined under explanation 4(xxxii) of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 which was amended by Notification No. 20/2019- Central Tax (Rate)

 

Restaurant service means

supply, by way of or as part of any service,

of goods, being food or any other article for human consumption or any drink,

provided by a restaurant, eating joint including mess, canteen,

whether for consumption on or away from the premises

where such food or any other article for human consumption or drink is supplied.

 

1.5 What do you mean by Outdoor catering

 

As defined under explanation 4(xxxiii) of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 which was amended by Notification No. 20/2019- Central Tax (Rate)

Outdoor catering means

supply, by way of or as part of any service, of goods,

being food or any other article for human consumption or any drink,

at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.

 

1.6 What do you mean by Specified premises

 

As defined under explanation 4(xxxvi) of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 which was amended by Notification No. 20/2019- Central Tax (Rate)

 

Specified premises, for a financial year, means,-

(a) a premises from where the supplier has provided in the preceding financial year,

hotel accommodation service

having the value of supply of any unit of accommodation

above seven thousand five hundred rupees per unit per day or equivalent; or

(b)   a premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration, on or after the 1st of January and not later than 31st of March of the preceding financial year, declaring the said premises to be a specified premises; or

(c)  a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises;

 

Explanation (iv) Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,-

(a)   credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and 

(b)   credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder. 

 

 

Analysis

As per Notification No. 05/2025 – Central Tax (Rate) (Annexure), the existing Registered Restaurant service provider cannot declare itself as "Specified Premises" because the declaration does not include the registered Restaurant service provider who can opt for specifed premises. The declaration can be made by Registered person supplying Hotel accomodation service or a person applying for registration before the jurisdictional GST authority declaring the premises to be a ‘specified premises.

 

 

Notification  No. 12/2017 - Dated: 28-06-2017 - CGST Rate

 

 

S.No.	Heading	Description of Services	Rate	Condition
12A	Heading 9963	Supply of accommodation services having value of supply less than or equal to 20,000 (twenty thousand) rupees per person per month provided that the accommodation service is supplied for a minimum continuous period of ninety days. {Inserted by Notification No. 04/2024- Central Tax (Rate)}	Nil	Nil
14	Heading 9963	Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below or equal to one thousand rupees per day or equivalent. {Omitted by Notification No. 04/2022- Central Tax (Rate)}	Nil	Nil

 

 

2. RCM in case of ECO

 

 

Notification No. 17/2017-Central Tax (Rate) as amended by Notification No. 17/2021-Central Tax (Rate) further amended by Notification No.8/2025-Central Tax (Rate) notifies that in case of the following categories of services, the tax on intra-State supplies shall be paid by the ECO (electronic commerce operator) –

(ii) specifies services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through ECO is liable for registration under sub-section (1) of section 22 of the said CGST Act.

(iv) supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises.

 

Explanation (c) specified premises means premises providing hotel accommodation service having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent. {Inserted by Notification No. 17/2021-Central Tax (Rate)}

 

Explanation (c) - “specified premises” has the same meaning as assigned to it in clause (xxxvi) of paragraph 4 of notification number 11/2017-Central Tax (Rate) dated 28.06.2017. {Substituted by Notification No.8/2025-Central Tax (Rate)}

 

Circular No. 167/23/2021-GST

 

Issue 1-

Would ECOs have to still collect TCS in compliance with section 52 of the CGST Act, 2017?

 

Clarification –

As ‘restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the ECO shall be liable to pay GST on restaurant services provided, with effect from the 1st January, 2022, through ECO. Accordingly, the ECOs will no longer be required to collect TCS and file GSTR 8 in respect of restaurant services on which it pays tax in terms of section 9(5).

On other goods or services supplied through ECO, which are not notified u/s 9(5), ECOs will continue to pay TCS in terms of section 52 of CGST Act, 2017 in the same manner at

present.

 

Issue 2-

Would ECOs have to mandatorily take a separate registration w.r.t supply of restaurant service [notified under 9(5)] through them even though they are registered to pay GST on services on their own account?

 

Clarification –

As ECOs are already registered in accordance with rule 8(in Form GST-REG 01) of the CGST Rules, 2017 (as a supplier of their own goods or services), there would be no mandatory requirement of taking separate registration by ECOs for payment of tax on restaurant service under section 9(5) of the CGST Act, 2017.

 

Issue 3-

Would the ECOs be liable to pay tax on supply of restaurant service made by unregistered business entities?

 

Clarification –

Yes. ECOs will be liable to pay GST on any restaurant service supplied through them including by an unregistered person.

 

Issue 4-

What would be the aggregate turnover of person supplying ‘restaurant service’ through ECOs?

 

Clarification –

It is clarified that the aggregate turnover of person supplying restaurant service through ECOs shall be computed as defined in section 2(6) of the CGST Act, 2017 and shall include the aggregate value of supplies made by the restaurant through ECOs. Accordingly, for threshold consideration or any other purpose in the Act, the person providing restaurant service through ECO shall account such services in his aggregate turnover.

 

Issue 5-

Can the supplies of restaurant service made through ECOs be recorded as inward supply of ECOs (liable to reverse charge) in GSTR 3B?

 

Clarification –

No, ECOs are not the recipient of restaurant service supplied through them. Since these are not input services to ECO, these are not to be reported as inward supply (liable to reverse charge).

 

Issue 6-

Would ECOs be liable to reverse proportional input tax credit on his input goods and services for the reason that input tax credit is not admissible on ‘restaurant service’?

 

Clarification –

ECOs provide their own services as an electronic platform and an intermediary for which it would acquire inputs/input service on which ECOs avail input tax credit (ITC). The ECO charges commission/fee etc. for the services it provides. The ITC is utilised by ECO for payment of GST on services provided by ECO on its own account (say, to a restaurant). The situation in this regard remains unchanged even after ECO is made liable to pay tax on restaurant service. ECO would be eligible to ITC as before. Accordingly, it is clarified that ECO shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5) of the Act.

It may also be noted that on restaurant service, ECO shall pay the entire GST liability in cash (No ITC could be utilised for payment of GST on restaurant service supplied through ECO)

 

Issue 7-

Can ECO utilize its Input Tax Credit to pay tax w.r.t ‘restaurant service’ supplied through the ECO?

 

Clarification –

No. As stated above, the liability of payment of tax by ECO as per section 9(5) shall be discharged in cash.

 

Issue 8-

Would supply of goods or services other than ‘restaurant service’ through ECOs be taxed at 5% without ITC?

 

Clarification –

ECO is required to pay GST on services notified under section 9(5), besides the services/other supplies made on his own account.

On any supply that is not notified under section 9(5), that is supplied by a person through ECO, the liability to pay GST continues on such supplier and ECO shall continue to pay TCS on such supplies.

Thus, present dispensation continues for ECO, on supplies other than restaurant services. On such supplies (other than restaurant services made through ECO) GST will continue to be billed, collected and deposited in the same manner as is being done at present. ECO will deposit TCS on such supplies.

 

Issue 9-

Would ‘restaurant service’ and goods or services other than restaurant service sold by a restaurant to a customer under the same order be billed differently? Who shall be liable for raising invoices in such cases?

 

Clarification –

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECO, and other compliances under the Act, including issuance of invoice to customer, continues to lie with the respective suppliers (and ECOs being liable only to collect tax at source (TCS) on such supplies), it is advisable that ECO raises separate bill on restaurant service in such cases where ECO provides other supplies to a customer under the same order.

 

Issue 10-

Would ‘restaurant service’ and goods or services other than restaurant service sold by a restaurant to a customer under the same order be billed differently? Who shall be liable for raising invoices in such cases?

Clarification –

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECO, and other compliances under the Act, including issuance of invoice to customer, continues to lie with the respective suppliers (and ECOs being liable only to collect tax at source (TCS) on such supplies), it is advisable that ECO raises separate bill on restaurant service in such cases where ECO provides other supplies to a customer under the same order.

 

Issue 10-

 

Who will issue invoice in respect of restaurant service supplied through ECO - whether by the restaurant or by the ECO?

 

Clarification –

The invoice in respect of restaurant service supplied through ECO under section 9(5) will be issued by ECO.

 

Issue 11-

Clarification may be issued as regard reporting of restaurant services, value and tax liability etc in the GST return.

 

Clarification –

A number of other services are already notified under section 9(5). In respect of such services, ECO operators are presently paying GST by furnishing details in GSTR 3B.

The ECO may, on services notified under section 9 (5) of the CGST Act,2017, including on restaurant service provided through ECO, may continue to pay GST by furnishing the details in GSTR 3B, reporting them as outward taxable supplies for the time being.

Besides, ECO may also, for the time being, furnish the details of such supplies of restaurant services under section 9(5) in Table 7A(1) or Table 4A of GSTR-1, as the case maybe, for accounting purpose.

Registered persons supplying restaurant services through ECOs under section 9(5) will report such supplies of restaurant services made through ECOs in Table 8 of GSTR-1 and Table 3.1 (c) of GSTR-3B, for the time being.

 

 

3. Place of Supply for Hotels

 

 

Section 12 – 

Place of supply of services where location of supplier and recipient is in India -

 

location of supplier and recipient is in India	Place of supply of services	Reference
Services by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a houseboat or any other vessel	location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located: Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.	Section 12(3)(b)
Services by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property		Section 12(3)(c)
Any ancillary services related to above		Section 12(3)(d)
restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery	location where the services are actually performed	Section 12(4)

 

 

Section 13 – 

 

Place of supply of services where location of supplier or location of recipient is outside India –

 

location of supplier or recipient is outside India	Place of supply of services	Refer
services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators	place where the immovable property is located or intended to be located	Section 13(4)
services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and services ancillary to such admission or organisation	place where the event is actually held	Section 13(5)
Where any services referred to above is supplied at more than one location, including a location in the taxable territory	place of supply shall be the location in the taxable territory	Section 13(6)
services referred to above are supplied in more than one State or Union territory	place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.	Section 13(7)

 

 

4. Composition levy

 

 

Following persons cannot opt for composition scheme in case of Restaurant, Hotels and accommodation as per section 10: -

 

Cases	Refer
If it provides alcohol with restaurant services	Section 10(2)(b)
If it provides inter-state outward supplies	Section 10(2)(c)
If it provides services through ECO	Section 10(2)(d)
If it is CTP or NRTP	Section 10(2)(f)

 

A taxable person registered under composition scheme shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax. [Section 10(4)]

 

If a taxable person has paid tax under composition scheme, despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 or section 74A shall, mutatis mutandis, apply for determination of tax and penalty. [Section 10(5)]

 

Detailed provision of Section 10 [Composition Levy]–

 

(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding,––

 

(a) 1% of the turnover in the State or turnover in Union territory in case of a manufacturer,

 

(b) 2.5% of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

 

(c) 0.5% of the turnover in State or turnover in Union territory in case of other suppliers,

 

subject to such conditions and restrictions as may be prescribed:

 

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one cror

(c) he is not engaged in making any inter-State outward supplies of goods or services;

 

(d) he is not engaged in making any supply of services through an ECO electronic commerce operator who is required to collect tax at source under section 52;

 

(e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the 7[Council; and]

 

(f) he is neither a casual taxable person (CTP) nor a (NRTP) non-resident taxable person:

 

Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961) (43 of 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

 

(2A) Notwithstanding anything to the contrary contained in this Act, but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, not eligible to opt to pay tax under sub-section (1) and sub-section (2), whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding three % of the turnover in State or turnover in Union territory, if he is not––

 

(a) engaged in making any supply of goods or services which are not leviable to tax under this Act;

 

(b) engaged in making any inter-State outward supplies of goods or services;

 

(c) engaged in making any supply of services through an ECO (electronic commerce operator) who is required to collect tax at source under section 52;

 

(d) a manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council; and

e and fifty lakh rupees, as may be recommended by the Council.

 

Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding 10% of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.

 

Explanation.–– For the purposes of second proviso, the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account for determining the value of turnover in a State or Union territory.

 

(2) The registered person shall be eligible to opt under sub-section (1), if––

 

(a) save as provided in sub-section (1), he is not engaged in the supply of services;

 

(b) he is not engaged in making any supply of goods or services which are not leviable to tax under this Act;

 

(e) a casual taxable person (CTP) or a (NRTP) non-resident taxable person:

 

Provided that where more than one registered person are having the same Permanent Account Number issued under the Income-tax Act, 1961 (43 of 1961.), the registered person shall not be eligible to opt for the scheme under this sub-section unless all such registered persons opt to pay tax under this sub-section.]

 

(3) The option availed of by a registered person under sub-section (1) or subsection (2A), as the case may be, shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1) or subsection (2A), as the case may be,.

 

(4) A taxable person to whom the provisions of sub-section (1) or, as the case may be, sub-section (2A) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

 

(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) or sub-section (2A), as the case may be, despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 or section 74A shall, mutatis mutandis, apply for determination of tax and penalty.

 

Explanation 1. For the purposes of computing aggregate turnover of a person for determining his eligibility to pay tax under this section, the expression “aggregate turnover” shall include the value of supplies made by such person from the 1st day of April of a financial year upto the date when he becomes liable for registration under this Act, but shall not include the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

 

Explanation 2. For the purposes of determining the tax payable by a person under this section, the expression “turnover in State or turnover in Union territory” shall not include the value of following supplies, namely :

 

(i) supplies from the first day of April of a financial year upto the date when such person becomes liable for registration under this Act; and

(ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

 

 

5. Provisions relating to Time of Supply (TOS): –

 

 

Section 13 provides provisions related to TOS. No specific provision has been provided in relation to Restaurant services. The TOS shall be determined in accordance with section 13(2) of the CGST Act, 2017.

 

 

6. Provisions relating to Registration: -

 

 

Section 22, Section23 and Section 24 of CGST Act provide provisions related to registration. No specific provision has been provided in relation to Restaurant services. The Registration applicability shall be determined in accordance with section 22, Section23 and Section 24 of the CGST Act, 2017.

 

 

7. Clarifications through Circulars –

 

 

7.1 Circular No. 27/01/2018-GST

 

Issue 1-

Will GST be charged on actual tariff or declared tariff for accommodation services?

 

Clarification –

Declared or published tariff is relevant only for determination of the tax rate slab. GST will be payable on the actual amount charged (transaction value).

 

Issue 2-

What will be GST rate if cost goes up (more than declared tariff) owing to additional bed.

 

Clarification –

GST rate would be determined according to declared tariff for the room, and GST at the rate so determined would be levied on the entire amount charged from the customer. For example, if the declared tariff is Rs. 7000 per unit per day but the amount charged from the customer on account of extra bed is Rs. 8000, GST shall be charged at 18% on Rs. 8000.

 

Issue 3-

Where will the declared tariff be published?

 

Clarification –

Tariff declared anywhere, say on the websites through which business is being procured or printed on tariff card or displayed at the reception will be the declared tariff. In case different tariff is declared at different places, highest of such declared tariffs shall be the declared tariff for the purpose of levy of GST.

 

Issue 4-

Same room may have different tariff at different times depending on season or flow of tourists as per dynamic pricing. Which rate to be used then?

 

Clarification –

In case different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.

 

Issue 5-

If tariff changes between booking and actual usage, which rate will be used?

 

Clarification –

Declared tariff at the time of supply would apply.

 

Issue 6-

GST at what rate would be levied if an upgrade is provided to the customer at a lower rate?

 

Clarification -

If declared tariff of the accommodation provided by way of upgrade is Rs 10000, but amount charged is Rs 7000, then GST would be levied @ 28% on Rs 7000/-.

 

Issue 7-

Whether for the purpose of entries at Sl. Nos. 34(ii) [admission to cinema] and 7(ii)(vi)(viii) [Accommodation in hotels, inns, etc.], of notification 11/2017 - CT (Rate) dated 28th June 2017, price/ declared tariff includes the tax component or not?

 

Clarification –

Price/ declared tariff does not include taxes.

 

Issue 8-

Whether rent on rooms provided to in - patients is exempted? If liable to tax, please mention the entry of CGST Notification 11/2017 - CT(Rate)

 

Clarification –

Room rent in hospitals is exempt.

 

Issue 9-

What will be the rate of tax for bakery items supplied where eating place is attached - manufacturer for the purpose of composition levy?

 

Clarification –

Any service by way of serving of food or drinks including by a bakery qualifies under section 10 (1) (b) of CGST Act and hence GST rate of composition levy for the same would be 5%.

 

Issue 10-

Whether homestays providing accommodation through an Electronic Commerce Operator, below threshold limit are exempt from taking registration?

 

Clarification –

Notification No. 17/2017-Central Tax (Rate), has been issued making ECOs liable for payment of GST in case of accommodation services provided in hotels, inns guest houses or other commercial places meant for residential or lodging purposes provided by a person having turnover below Rs. 20 lakhs (Rs. 10 lakhs in special category states) per annum and thus not required to take registration under section 22(1) of CGST Act. Such persons, even though they provide services through ECO, are not required to take registration in view of section 24(ix) of CGST Act, 2017.

 

 

7.2 Circular No. 48/22/2018-GST

 

Issue -

Whether the benefit of zero-rated supply can be allowed to all procurements by a SEZ developer or a SEZ unit such as event management services, hotel and accommodation services, consumables etc?  

 

Clarification –

As per section 16(1) of the IGST Act, “zero rated supplies” means supplies of goods or services or both to a SEZ developer or a SEZ unit. Whereas section 16(3) of the IGST Act provides for refund to a registered person making zero rated supplies under bond/LUT or on payment of integrated tax, subject to such conditions, safeguards and procedure as may be prescribed. Further, as per the second proviso to rule 89(1) of CGST Rules, 2017, in respect of supplies to a SEZ developer or a SEZ unit, the application for refund shall be filed by the:

 

(a) supplier of goods after such goods have been admitted in full in the SEZ for authorised operations, as endorsed by the specified officer of the Zone;

(b) supplier of services along with such evidences regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone.

 

A conjoint reading of the above legal provisions reveals that the supplies to a SEZ developer or a SEZ unit shall be zero rated and the supplier shall be eligible for refund of unutilized input tax credit or integrated tax paid, as the case

may be, only if such supplies have been received by the SEZ developer or SEZ unit for authorized operations. An endorsement to this effect shall have to be issued by the specified officer of the Zone.

 

Therefore, subject to the provisions of section 17(5) of the CGST Act, if event management services, hotel, accommodation services, consumables etc. are received by a SEZ developer or a SEZ unit for authorised operations, as endorsed by the specified officer of the Zone, the benefit of zero-rated supply shall be available in such cases to the supplier.

 

 

7.3 Circular No. 178/10/2022-GST

 

Applicability of GST on Cancellation charges 

A supply contracted for, such as booking of hotel accommodation, an entertainment event or a journey, may be cancelled by a customer or may not proceed as intended due to his failure to show up for availing the same at the designated place and time. The supplier may allow cancelation of supply by the customer within a certain specified time period on payment of cancellation fee as per commercial terms of the contract. In case the customer does not show up for availing the service, the supplier may retain or forfeit part of the consideration or security deposit or earnest money paid by the customer for the intended supply.

It is a common business practice for suppliers of services such as hotel accommodation, tour and travel, transportation etc. to provide the facility of cancellation of the intended supplies within a certain time period on payment of cancellation fee. Cancellation fee can be considered as the charges for the costs involved in making arrangements for the intended supply and the costs involved in cancellation of the supply, such as in cancellation of reserved tickets by the Indian Railways.

Services such as transportation travel and tour constitute a bundle of services. The transportation service, for instance, starts with booking of the ticket for travel and lasts at least till exit of the passenger from the destination terminal. All services such as making available an online portal or convenient booking counters with basic facilities at the transportation terminal or in the city, to reserve the seats and issue tickets for reserved seats much in advance of the travel, giving preferred seats with or without extra cost, lounge and waiting room facilities at airports, railway stations and bus terminals, provision of basic necessities such as soap and other toiletries in the wash rooms, clean drinking water in the waiting area etc. form part and parcel of the transportation service; they constitute the various elements of passenger transportation service, a composite supply.. The facilitation service of allowing cancellation against payment of cancellation charges is also a natural part of this bundle. It is invariably supplied by all suppliers of passenger transportation service as naturally bundled and in conjunction with the principal supply of transportation in the ordinary course of business.

Therefore, facilitation supply of allowing cancellation of an intended supply against payment of cancellation fee or retention or forfeiture of a part or whole of the consideration or security deposit in such cases should be assessed as the principal supply. For example, cancellation charges of railway tickets for a class would attract GST at the same rate as applicable to the class of travel (i.e., 5% GST on first class or air-conditioned coach ticket and nil for other classes such as second sleeper class). Same is the case for air travel.

Accordingly, the amount forfeited in the case of non-refundable ticket for air travel or security deposit or earnest money forfeited in case of the customer failing to avail the travel, tour operator or hotel accommodation service or such other intended supplies should be assessed at the same rate as applicable to the service contract, say air transport or tour operator service, or other such services.

 

 

7.4 Circular No. 164/20/2021-GST

 

Services by cloud kitchens/central kitchens:

Representations have been received requesting for clarification regarding the classification and rate of GST on services rendered by Cloud kitchen or Central Kitchen.

The word “restaurant service” is defined in Notification No. 11/2017 – Central tax (Rate) as below: -

“Restaurant service” means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.‟

The explanatory notes to the classification of service state that “restaurant service” includes services provided by Restaurants, Cafes and similar eating facilities including takeaway services, room services and door delivery of food. Therefore, it is clear that takeaway services and door delivery services for consumption of food are also considered as restaurant service and, accordingly, service by an entity, by way of cooking and supply of food, even if it is exclusively by way of takeaway or door delivery or through or from any restaurant would be covered by restaurant service. This would thus cover services provided by cloud kitchens/central kitchens.

Accordingly, as recommended by the Council, it is clarified that service provided by way of cooking and supply of food, by cloud kitchens/central kitchens are covered under “restaurant service”, as defined in notification No. 11/2017- Central Tax (Rate) and attract 5% GST [without ITC].

 

Supply of ice cream by ice cream parlors

 

Representations have been received requesting for clarification regarding the supplies provided in an ice cream outlet.

Ice cream parlors sell already manufactured ice- cream and they do not have a character of a restaurant. Ice-cream parlors do not engage in any form of cooking at any stage, whereas, restaurant service involves the aspect of cooking/preparing during the course of providing service. Thus, supply of ice-cream parlor stands on a different footing than restaurant service. Their activity entails supply of ice cream as goods (a manufactured item) and not as a service, even if certain ingredients of service are present.

Accordingly, as recommended by the Council, it is clarified that where ice cream parlors sell already manufactured ice- cream and do not cook/prepare ice-cream for consumption like a restaurant, it is supply of ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it is clarified that ice cream sold by a parlor, or any similar outlet would attract GST at the rate of 18%.

 

 

7.5 Circular No. 177/09/2022-TRU

 

Rate of GST applicable on supply of ice-cream by ice-cream parlors during the period from 01.07.2017 to 05.10.2021

On the recommendation of the GST Council in its 45th meeting, it was clarified vide circular 164/20/2021-GST dated 06.10.2021 that ice cream parlours sell already manufactured ice-cream and they do not have a character of a restaurant and hence, ice cream sold by a parlor or any similar outlet attracts standard rate of GST 18% with ITC.

Representations have been received requesting that GST at 18% may be levied on supply of ice-cream by ice-cream parlors with effect from 06.10.2021.

It has been represented that ice cream parlors which paid GST @ 5% without ITC in view of prevailing doubt before the issuance of the Circular dated 6.10.2021 did not avail ITC and paid 5% in cash. Such ice-cream parlors have thus foregone significant ITC benefit.

Considering the overall circumstances of the case, it is clarified that past cases of payment of GST on supply of ice-cream by ice-cream parlors @ 5% without ITC shall be treated as fully GST paid to avoid unnecessary litigation. Since the decision is only to regularize the past practice, no refund of GST shall be allowed, if already paid at 18%. With effect from 6.10.2021, the ice Cream parlors are required to pay GST on supply of ice-cream at the rate of 18% with ITC.

 

Other topics –

 

Is GST applicable on tips and service charges?

Voluntary tips directly paid by customers to waiters/staff or handed over in cash or by card (not retained by the restaurant) are not consideration for any supply. Hence, GST is not applicable on such tips.

 

 

References

Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017

Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017

Notification No. 13/2017 – Central Tax (Rate) dated June 28, 2017

Circular No. 27/01/2018-GST

Circular No. 32/06/2018-GST

Circular No. 48/22/2018-GST

Circular No. 164/20/2021-GST

Circular No. 167/23/2021-GST

Circular No. 177/09/2022-TRU

Circular No. 178/10/2022-GST