The tourism industry has a clearly noticeable contribution to the Indian Economy, and the contribution will be higher in the near future. Hotels and restaurants are a major part of this industry and without them, the industry can’t survive. It provides employment opportunities to a large population and various micro, small and medium entrepreneurs are dependent on it. That’s why the Government can’t ignore the problems the industry is facing.
Submit Query Regarding GST Updated Software
Before the introduction of the GST, the hotel & restaurant industry was facing problems due to a multiplicity of taxes which includes VAT, Service Tax, Luxury Tax, and even excise duties on the manufacture of pastries, etc. After the GST all these taxes have been summed into one tax. However, the GST also introduced some new problems.
Hotels provide facilities for lodging or accommodation but also can include restaurant services, whereas restaurants offer cooked food and other facilities as per their reference. The rate structure for the hotel and restaurant industry went through various amendments in all these years after introducing GST Laws and below we are mentioning all these changes in GST Rates.
In the 47th GST council meeting, the Union Finance Minister Nirmala Sitharaman changed the GST rates on hotel rooms according to their tariff. Let us check out the revised GST rates on hotel room tariffs from now onwards:
Transaction Value Per Unit (Rs) Per Day | GST
Amendments made with the 47th GST Council Meeting held on 28th & 29th June 2022 and come into effect from 18-07-2022.
| Sl. No. | Room Rent | GST Rate |
| 1 | INR 1 to Rs. 1,000/- per day | 12% GST from 18th July 2022 |
| 2 | Rs. 1,001/- to Rs. 7500/- per day | 12% GST | Heading 9963 (Accommodation, food and beverage services) – “(i) Supply of “hotel accommodation” having a value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent.” |
| 3 | INR 7501 per day or more | 18% |
Amendments made with the 14th GST Council Meeting held on 18th & 19th May 2017 and come into effect from 01-07-2017.
| Sl. No. | Room Rent | GST Rate |
| 1 | Rs. 0 to Rs. 1,000/- per day | Exempt |
| 2 | Rs. 1,001/- to Rs. 2,499/- per day | 12% with full ITC |
| 3 | Rs. 2,500/- to Rs, 4,999/- per day | 18% with full ITC |
| 4 | Rs. 5,000/- and above per day | 28% with full ITC |
Amendment made through the 37th GST Council Meeting held on 20-09-2019 and came into effect from 01-10-2019.
| Sl. No. | Room Rent | GST Rate |
| 1 | Rs. 0/- to Rs. 1,000/- per day | Exempt |
| 2 | Rs. 1,001/- to Rs. 7,500/- per day | 12% with full ITC |
| 3 | Rs. 7,501/- and above per day | 18% with full ITC |
The GST rate on catering services other than premises has been done 5% without ITC from the accommodation of INR 7501 and is mandatory for all catering services.
Restaurant Industry
Amendment made through 14th GST Council Meeting held on 18th & 19th May 2017 and came into effect from 01-07-2017.
| Sl. No. | Room Rent | GST Rate |
| 1 | Restaurants do not have facilities for air-conditioning or central heating at any time during the year | 12% |
| 2 | Restaurants having facility of air-conditioning or central heating at any time during the year | 18% |
| 4 | Other than above | 18% |
Amendments made through the 23rd GST Council Meetings held on 10-11-2017 come into effect from 15-11-2017.
| Sl. No. | Room Rent | GST Rate |
| 1 | All stand-alone restaurants irrespective of air conditioned or otherwise | 5% GST without ITC |
| 2 | Food parcels (or takeaways) | 5% GST without ITC |
| 3 | Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day | 5% GST without ITC |
| 4 | Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) | 18% GST with full ITC |
| 5 | Outdoor catering | 18% GST with full ITC |
The amendment proposed in the 37th GST Council Meeting dated 20-09-2019 came into action from 01-10-2019.
| Sl. No. | Room Rent | GST Rate |
| 1 | Catering in premises with a daily tariff of unit of accommodation is Rs 7501 and above | 5% GST without ITC |
| 2 | Catering in premises with a daily tariff of a unit of accommodation is Rs 7501 and above | 18% with ITC |
| 3 | Indian Railways Catering and Tourism Corporation Ltd. or their licensees/ Indian Railways | 5% GST without ITC |
The final Applicable rate structure for restaurants is as follows:
| Sl. No. | Room Rent | GST Rate | Chapter/ Section/ Heading |
| 1 | All stand-alone restaurants irrespective of air-conditioned otherwise | 5% GST without ITC | Heading 9963(Accommodation, food and beverage services) |
| 2 | Food parcels (or takeaways) | 5% GST without ITC | |
| 3 | Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day | 5% GST without ITC | |
| 4 | Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) | 18% GST with full ITC | |
| 5 | Indian Railways Catering and Tourism Corporation Ltd. or their licensees / Indian Railways | 5% GST without ITC | |
| 5 | Catering in premises with a daily tariff of unit of accommodation is Rs 7501 and above | 5% GST without ITC | |
| 6 | Catering in premises with a daily tariff of a unit of accommodation is Rs 7501 and above | 18% with ITC |
Has the tariff been declared relevant in determining the GST rate?
Notification No. 13/2018-Central Tax (Rate) released on 26-07-2018 and come into effect from 27-07-2018 mentions that:
“(b) in items (ii), (vi) and (viii),-(A) for the words “declared tariff” wherever they occur, the words “value of supply” shall be substituted;”
Thus, with effect from 27-07-2018 GST on hotel room tariff will be determined on the basis of the value of supply means on the value actually charged in the invoice, not on the declared value.
E-Commerce Operators
E-commerce operators or online platforms such as Oyo, Swiggy, Zomato, etc., have become an important part of this industry. They play a huge role in the industry as well as in revenue. They bring orders and customers and in return, they charge a commission. These transactions can be understood as :
- GST on hotel tariff or restaurant bill will normally be levied as per the prescribed rates discussed above.
- GST will be 18% of the commission paid to e-commerce operators.
- Here is an example of a Billing Procedure.
Hotel Industry
| Sl. No. | Particulars | Amount (Rs.) |
| 1 | Room Tariff Charges | 10,000.00 |
| 2 | Discount 30% of 1 | 3,000.00 |
| 3 | Net Bill Value (1-2) | 7,000.00 |
| 4 | GST @ 12% on room tariff (5% of 3) | 840.00 |
| 5 | Total Payable by Customer (3+4) | 7,840.00 |
| 6 | Service Fee of E-Commerce Operator (40% of 3) | 2,800.00 |
| 7 | GST @ 18% on Service Fee (SAC 996813) [18% of 6] | 504.00 |
| 8 | Total Bill of E-Commerce Operator (6+7) | 3,304.00 |
| 9 | Net Payable to Hotel by E-Commerce Operator (5-8) | 4,536.00 |
Important Points:
- The GST rate on hotel accommodation services is kept at 18%, although it can be 12% as per the room tariff in the hotel.
- TCS Provisions on E-Commerce Operators is not included in the above example.
- In the example above transaction value was less than Rs. 7,500/- thus 12% rate was applied.
Restaurant Industry:
| Sl. No. | Particulars | Amount (Rs.) |
| 1 | Restaurant bill value | 100.00 |
| 2 | Restaurant Discount 10% | 10.00 |
| 3 | Net Bill Value (1-2) | 90.00 |
| 4 | GST @ 5% on food bill (3*5%) | 4.50 |
| 5 | Total Payable by Customer (3+4) | 94.50 |
| 6 | Service Fee of E-Commerce Operator | 10.00 |
| 7 | GST @ 18% on Service Fee (SAC 996813) [6*18%] | 1.80 |
| 8 | Total Bill of E-Commerce Operator (6+7) | 11.80 |
| 9 | Net Payable to Restaurant by E-Commerce Operator (5-8) | 82.70 |
Note:
- The GST rate on restaurant services is assumed to be 5% in the example above, although it can also be 18% depending on the room tariff in the hotel.
- TCS Provisions on E-Commerce Operators is not included in the above example.
Banquet Hall and Catering Services
Banquet halls are different from Hotels and restaurants and so are their services. The Banquet Hall provides rent of premises to organize an event and accommodation or food facilities may or may not include. Thus, it is different, the difference needs to be considered as the composite supply and it will attract the following SAC for such services:
| Chapter/ Section/ Heading | Description of Service | CGST | SGST/ UTGST | IGST | ITC |
| Heading 9963(Accommodation, food and beverage services) | (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‟ | 2.50 | 2.50 | 5.00 | Not Available |
| (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” | 2.50 | 2.50 | 5.00 | Not Available |
When the Reverse Charge Mechanism is Applicable
The Hotel and restaurant industry is exempted from the Reverse Charge Mechanism under section 9(4) of the CGST Act, 2017, thus under this mechanism no tax needs to be paid.
According to section 13 of the CGST Act, 2017, supply time for the services will be the earliest of the following
- The invoice issuing date by the supplier, if the invoice is issued within the prescribed period under sub-section (2) of section 31 or the date of payment’s receipt, whichever is earlier; or
- The date of provision of service, if the invoice is not issued within the prescribed period under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier.
- The date on which the recipient represents the receipt of services in his account’s book, in case where provisions of clause (a) or clause (b) are not applicable:
Thus the time of supply for hotel and restaurant services will be as follows:
If invoice generated:
- Time when the invoice issued, or
- Time of provision of service Earlier
- Time of recording in books of accounts
If the invoice is not generated
- Time of receipt of payment, or
- Time of provision of service Earlier
- Time of recording in books of accounts
Place of Supply
Section 10(3) of the IGST Act, 2017 states as follows:
“(3) The place of supply of services, by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or (4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.”
Thus it is clear that In the case of the hotel industry, the place of supply will be the location of immovable property and in the case of restaurant location where the services are actually performed. This provision also introduced some issues and the same are discussed below:
When are the Supplier and Recipient in Separate States?
In such cases, the location of the hotel will be considered as the place of supply, and CGST and State Government GST will be levied and not IGST. Additionally, the recipient of service will not be able to avail ITC of the tax paid on such transactions as GST paid in the state is not eligible for state GST of the recipient.
Place of supply SEZ Units
Section 7(5) of the IGST Act, 2017 reads as under:
“(5) Supply of goods or services or both,- (a)…….(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or (c)……shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.”
Further, Circular No. 48/22/2018-GST, released on 14.06.2018, explains that services of short-term conferencing, accommodation, banqueting etc., provided to a SEZ developer or a SEZ unit will be considered as an inter-State supply.
Thus, it is clearly observable that the above provisions, in case of a supply of hotel or restaurant services to a SEZ unit will be charged with IGST and not CGST and SGST.
The industry even with all the problems is heading toward a balanced condition and currently, it is recovering from damages caused by Corona. However, it is still important and plays a vital role in Indian Economy.
