18% GST on Hotel Restaurants for Rooms Above ₹7,500/Day from April

Quick Summary

• The Central Board of Indirect Taxes and Customs (CBIC) clarified new GST rules for hotels with room tariffs exceeding ₹7,500 per day.
• These hotels will be classified as “specified premises,” with their restaurant services attracting an 18% GST rate with input tax credit (ITC).
• For restaurants in non-specified premises, the GST rate will remain at 5% without ITC.
• Hotels can voluntarily opt for the “specified premises” classification if their room tariff did not exceed ₹7,500 in the previous fiscal year. This classification remains until opted out and requires separate declarations for each premise.
• The new rules aim to link GST rates on restaurant services to accommodation value and eliminate the need for annual filings.
• Saurabh Agarwal, tax partner at EY, stated that this move provides clarity and benefits by allowing eligible restaurants to avail ITC under the 18% levy.
• Effective date of implementation: April 1.

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Indian Opinion Analysis

The CBIC’s clarification on differentiated GST rates for hotel-based restaurant services resolves a long-standing ambiguity within india’s hospitality sector. By linking the taxation mechanism directly to accommodation charges, this policy introduces a measure of fairness tied to pricing tiers. The ability to opt into or out of “specified premises” branding also grants flexibility to establishments based on yearly assessments.

Implementing an 18% levy with ITC allows more premium hotels leveraging input credits a competitive advantage but could increase operational complexity for middle-segment players balancing affordability and compliance burdens. On another front, this move simplifies processes like annual filings while providing much-needed resolution in disputes between businesses and regulators.

India’s hospitality industry might anticipate margin impacts across sectors depending on how pricing strategies evolve post-april regulations-whether affordability influences markets adhering primarily below ₹7,500 thresholds compensating customers otherwise facing higher Goods taxes branches nestled affordable-kind scales adjusting internal gaps confirm midlarge