The 55th Council Meeting, held on December 21, 2024, brought significant changes to the regulations overseeing restaurant services in hotels. These changes, set to take effect on April 1, 2025, aim to align GST rates with the actual value of hotel accommodations, promoting transparency and fairness.
Key Changes Announced
The Council proposed the removal of the definition of "declared tariff" and suggested revising the definition of "specified premises" to better align GST rates with the actual value of hotel accommodations. The GST rate applicable to restaurant services in hotels will now be determined by the "value of supply" of each unit of accommodation offered by the hotel in the previous financial year.
New GST Rates
- For Hotel Rooms with Value of Supply Exceeding ₹7,500:
- Restaurant services will be subject to an 18% GST rate.
- Input Tax Credit (ITC) will be available.
- For Hotel Rooms with Value of Supply ₹7,500 or Lower:
- Restaurant services will be subject to a 5% GST rate.
- No Input Tax Credit (ITC) will be available.
- Optional 18% GST Rate:
- Hotels can choose to apply an 18% GST rate on restaurant services, along with the option for ITC, irrespective of room tariffs, by providing a declaration either prior to the start of the financial year or at the time of registration.
Impact on the Hospitality Industry
These changes are expected to bring more clarity and fairness to the taxation of restaurant services in hotels. By linking GST rates to the actual value of hotel accommodations, the Council aims to ensure that the tax burden is proportionate to the services provided. This move is likely to benefit both hotel operators and customers by promoting transparency and reducing ambiguities in tax calculations.
Conclusion
The changes to the GST rate on restaurant services in hotels, effective April 2025, mark a significant step towards a more transparent and fair taxation system. Hotel operators should prepare for these changes by reviewing their pricing strategies and ensuring compliance with the new regulations. By staying informed and proactive, businesses can navigate these changes smoothly and continue to provide excellent services to their customers.
