Hotels with room rents exceeding INR7,500 per day at any point during a financial year will be categorized as “specified premises” starting April 1, 2025. According to a clarification by the Central Board of Indirect Taxes and Customs (CBIC), restaurants operating within such hotels will attract 18% GST with input tax credit (ITC).
The taxability will now be determined based on the value of supply (transactional value) instead of the earlier “declared tariff” concept. Declared tariff previously included the total charges for amenities such as furniture, air conditioning, and refrigerators, irrespective of any discounts offered on the published rates.
The CBIC clarified that the status of “specified premises” for a financial year will depend on whether the hotel’s value of supply for room accommodations in the previous fiscal year exceeded INT7,500 per unit per day. For hotels whose room rents did not cross INR7,500 per unit per day in the preceding financial year, restaurant services will continue to attract 5% GST without ITC.
Hotels intending to charge more than INR7,500 room rent from the next fiscal can opt into the “specified premises” category by submitting a declaration to GST authorities between January 1 and March 31 of the ongoing fiscal. New hotels seeking registration must file this declaration within 15 days of obtaining their GST registration.
The CBIC emphasized that replacing “declared tariff” with “value of supply” reflects the hospitality industry’s shift towards dynamic pricing models. The new system aims to provide clarity and certainty regarding a hotel’s “specified premises” status for any given fiscal year.
“This streamlined process eliminates annual filings, and hotels can voluntarily opt in or out of the specified premises classification,” explained Saurabh Agarwal, Tax Partner at EY. Separate declarations are required for each premise. Restaurants located outside specified premises will remain taxed at 5% GST without ITC.
The introduction of these rules also allows restaurant services in specified premises to avail of the 18% GST rate with ITC, ensuring alignment with modern pricing practices and simplifying compliance for hoteliers.
