The Central Board of Indirect Taxes and Customs (CBIC) said on Thursday that hotels charging over Rs 7,500 per day for room rent in any financial year will be considered a “special place” for the next financial year. This means that restaurant services provided in these hotels will attract 18% GST with input tax credit. Starting from April 1, 2025, the tax on restaurants inside hotels will be based on the transaction value they charge customers, replacing the current “declared fee” system.

How Will a Hotel Be Considered a ‘Special Place’?

According to CBIC’s FAQs on “Restaurant service at a fixed place”, from April 1, 2025, it will be decided based on the previous year’s records whether a hotel will be treated as a ‘special place’ (specified premises) or not. This decision will depend on the actual transaction value charged from customers for room rent in the last financial year.

18% GST with ITC on ‘Special Place’ Hotels

CBIC says a ‘special place’ means a hotel where the room rent was Rs 7,500 or more per day for at least one room in the previous year. Restaurants inside such hotels will be charged 18% GST with Input Tax Credit (ITC). Hotels where the room rent was less than Rs 7,500 will continue to attract only 5% GST without ITC.

Hotels Can Voluntarily Opt-In

Hotels planning to charge more than Rs 7,500 for room rent in the next financial year can declare their opt-in to the GST system between January 1 and March 31 of the current year. Hotels with new GST registrations must declare their premises as a ‘special place’ within 15 days of registration.

From Declared Rent to Actual Income

CBIC said that earlier, the decision was based on declared room rent, but now it will be based on actual earnings. This change is due to fluctuating room rates in many hotels. Hotels can also voluntarily declare themselves asa  ‘special place’, even if their income is less, to get full ITC benefits by applying 18% GST.

FAQs Issued for Easy Compliance

  • Tax expert Saurabh Agarwal said that CBIC released FAQs to simplify compliance.
  • If the hotel room rate exceeded Rs 7,500 in the previous year, then the restaurant will attract 18% GST with ITC.
  • Hotels with lower rent can still choose the ‘specified premises’ tag and the declaration will stay valid until they opt out.
  • Separate declarations are needed for each location, and for restaurants outside such hotels, the GST rate is only 5% without ITC.