The hospitality sector operates under a multi-tiered GST rate structure that depends on room tariff, the nature of the service, and the mode of supply. Hotels, resorts, restaurants, and banquet halls each have distinct GST obligations. Getting the rate wrong means either overcharging customers or underpaying tax — both with serious consequences.
This article provides a comprehensive GST compliance framework for hospitality and hotel businesses.
GST Rates for Hotel Accommodation
The GST rate for hotel accommodation depends on the value of supply (room tariff per unit per day):
- Up to ₹7,500: 12% GST with ITC.
- Above ₹7,500: 18% GST with ITC.
The value of supply is the transaction value — the amount charged for the room. Where the tariff includes food and beverages, the composite supply rules apply.
GST on Food and Beverage
Food and beverage services supplied by hotels attract GST at 5% without ITC. This applies to:
- Restaurant services within the hotel.
- Room service.
- Banquet services.
Where food is supplied as part of a composite supply with accommodation, the tax treatment depends on whether the supply is a composite supply or a mixed supply.
Restaurant Services and Section 9(5)
Restaurant services supplied through e-commerce operators like Zomato and Swiggy attract GST under Section 9(5) . The ECO is treated as the supplier and is liable to pay GST at 5%. The restaurant is not required to pay GST on these supplies.
ITC for Hotels
Hotels can claim ITC on:
- Furniture and fixtures.
- Kitchen equipment.
- Linen and housekeeping supplies.
- Utilities.
- Renovation and repair services.
ITC is blocked on:
- Motor vehicles (with exceptions).
- Food and beverages.
- Membership fees of clubs.
- Works contract services for immovable property.
Banquet and Event Services
Banquet and event services attract GST at 18%. The tax treatment depends on whether the service is a composite supply (including food, decoration, and venue) or a mixed supply.
OIDAR and Online Travel Agencies
Online travel agencies like MakeMyTrip and Booking.com facilitate hotel bookings. The GST treatment depends on whether the OTA is acting as an intermediary or as a supplier. If the OTA is an intermediary, it attracts 18% GST on commission. If the OTA is supplying the service on its own account, the composite supply rules apply.
Compliance Checklist for Hospitality Businesses
- Determine the correct GST rate for each service.
- Charge GST on room tariff at the applicable rate.
- Charge 5% GST on food and beverage.
- Comply with Section 9(5) for restaurant services through ECOs.
- Claim ITC on eligible expenses.
- Maintain proper records for audit purposes.
- File GSTR-1 and GSTR-3B on time.
Conclusion
Hospitality businesses face a complex GST rate structure. The room tariff threshold, restaurant services, and banquet services each have distinct treatments. A professional advisor ensures that the hotel charges the correct rate and claims eligible ITC.
At Anuj Desai & Associates, we provide expert GST compliance services for hospitality and hotel businesses. Our team handles rate classification, ITC optimisation, and return filing.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.