Date: January 16, 2025
Effective From: April 1, 2025
Issued By: Ministry of Finance, Department of Revenue
The CBIC, through Notification No. 05/2025 and Notification No. 08/2025-Central Tax (Rate), introduces significant changes to the GST framework for hotel accommodation and restaurant services.
Key Changes Introduced
Removal of “Declared Tariff” Concept
- The definition of “declared tariff” has been omitted.
- Impact:
- GST rates will now be determined based on the actual value charged to the customer rather than the advertised or published tariff.
- This change eliminates ambiguity and ensures a fair tax structure that reflects actual transactions.
New Definition of “Specified Premises”
The definition of “specified premises” has been revised to provide clarity and flexibility for hotel operators. The new definition takes effect from April 1, 2025.
| Condition | Explanation |
|---|---|
| (a) High-Value Accommodation: | Premises offering rooms valued at above Rs. 7,500 per unit per day or equivalent in the preceding financial year are considered “specified premises.” |
| (b) Declaration by Existing Hotels: | Hotels can declare themselves as “specified premises” between January 1st and March 31st of the preceding financial year, enabling them to opt for an 18% GST rate with ITC for restaurant services, regardless of room rates. |
| (c) Declaration by New Hotels: | New hotels applying for GST registration can declare themselves as “specified premises” within 15 days of acknowledgment of their registration application. |
3. GST Rate on Restaurant Services
The GST rate for restaurant services within hotels will now be based on the value of accommodation supplied in the preceding financial year:
| Accommodation Value (Previous Year) | GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Above Rs. 7,500 per unit per day | 18% | Allowed |
| Rs. 7,500 or less | 5% | Not Allowed |
Optional Flexibility:
- Hotels can opt for an 18% GST rate with ITC for their restaurant services, regardless of room rates, by filing a declaration at the start of the financial year or upon registration.
Purpose of the Amendments
- Simplifying GST Determination:
- Linking GST rates to actual value charged ensures fairness and reduces disputes.
- Providing Flexibility:
- Hotels can opt for a consistent 18% GST rate for easier compliance and ITC utilization.
- Reducing Compliance Burden:
- Eliminating the declared tariff simplifies the process for determining applicable GST rates.
Implementation and Transition Period
- These changes are scheduled to take effect from April 1, 2025, allowing businesses ample time to adapt to the new framework.
