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Everything to Know: GST on Hotel & Restaurant Services including amendment history

In this article, we will discuss the complete details including the various Circulars issued related to Hotel Service, Restaurant Service & Outdoor Catering Service incorporating the changes with effect from 1st July, 2017. Further, we will also discuss the contentious issues involved in the Industry in the form of Q&A.


Article is being divided into following:


Hotel Accommodation Service


Accommodation Service as defined in N.No. 20/2019 dated 30-09-2019:


"Hotel accommodation‟ means supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation.


GST Rate History :

Type of Accomodation

From 01.07.2017 to 30.09.2019

From 01.10.2019 to 17.07.2022

From 18.07.2022 onwards

Up to 1000

NIL

NIL

12%

1000 to 2499

12%

12%

12%

2500 to 7499

18%

12%

12%

7500* and Above

28%

18%

18%

Note:

1. Up to 30.09.2019, Determination of Rate of GST was on the basis of Declared Tariff like if Declared Tariff was 3500, GST Rate applicable was 18% (even though Value of Supply after discount was Rs. 2000) .


2. Though determination of Rate of GST was based on Declared Tariff, but GST was to be charged on Value of Supply only.


3. From 01.10.2019, Rate of GST on Accommodation Service will be determined based on Value of Supply.


4. * From 01.10.2019, 18% GST Rate is there if Value of Supply of Service is more than 7500 (on 7500 it will be 12%)..


"Declared tariff" means charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.


Further, Circular No. 27/01/2018-GST has been issued by the Board to explain various issues pertaining to Declared Tariff which are summarised below:

  • In case different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.

  • In case tariff changes between booking and actual usage, Declared tariff at the time of supply would apply.

  • In case, upgrade is provided (Lets Say Room of Rs. 10,000) at lower rate (Lets Say Rs. 7000), in that case, GST Rate of 28% will be payable on Rs.7,000.


Restaurant Service


Restaurant Service as defined in N.No.20/2019 dated 30-09-2019:


"Restaurant service‟ means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.



GST Rate History:

Type of Restaurant

Up to 14.11.2017

From 15.11.2017

Non AC & Non Alcohol Restaurant

12%

Category Eliminated

AC Restaurant or Restaurant having Licence for Alcohol

18%

Category Eliminated

Declared Tariff of any unit less than 7500

5% (with no ITC)

Declared Tariff of any unit 7500 or more*

18% (with ITC)

* From 01.10.2019, even 7,500 will comes in 5% category. only above 7500 will cover in 18%.

Further, it is to be noted that here Declared Tariff of any unit in a Hotel needs to be seen.


Notes

  1. Here Restaurants does not have option to avail ITC and pay 18% GST. It is mandatory for them to pay GST at the rate of 5% and does not avail ITC.

  2. Restaurant Service does not include supply of such service which is Event Based and which is occasional. (as this will fall under Outdoor Catering).

  3. This item includes such supply at a canteen, mess, cafeteria or dining space of an institution such as a hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional.

  4. Important: From 01.10.2019, for Hotel Accommodation Service, GST Rate will be determined based on Value of Supply of Hotel Accommodation Service (Up to 7500: 12% else 18%). However, for determination of GST rate on Restaurant Service, Declared Tariff of any unit in Hotel will be considered.


Restaurant Service provided through E-Commerce Operator


In terms of Notification No. 17/2021 CT(Rate), dated 18.11.2021, E-Commerce Operator is responsible for discharge of GST on Restaurant Service provided through it except when Restaurant Service Provider is responsible for payment of GST @18%. In this regards, for compliance requirements, Circular No. 167 / 23 /2021 - GST has also been issued.


Outdoor Catering Service


Outdoor Catering Service as defined in N.No.20/2019 dated 30-09-2019:


"Outdoor catering‟ means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.


GST Rate History


a. From 01.07.2017 to 30.09.2019

Nature of Service

Rate of GST

(i) Supply, by way of or as part of any service or in any other manner whatsoever in outdoor catering wherein goods, being food or any other article for human consumption or any drink (whether or not alcoholic liquor for human consumption), as a part of such outdoor catering and such supply or service is for cash, deferred payment or other valuable consideration.

18%

(ii) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, including but not limited to food or any other article for human consumption or any drink (whether or not alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) together with renting of such premises.

18%

S.No. (i) above was substituted vide by N.No. 13/2018 dated 26th July, 2018 to clarify the scope of Entry as: Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.

18%

b. From 01.10.2019 onwards

Nature of Service

Rate of GST

Composite supply/Independent Supply of "outdoor catering‟ together with renting of premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) at premises other than "specified premises‟ provided by any person other than-

(a) suppliers providing "hotel accommodation" at "specified premises", or

(b) suppliers located in "specified premises‟.

5% (without ITC)

Outdoor Catering Other than above

18%

Specified Premise: means premises providing "hotel accommodation‟ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”


Above Entry in simplified form means any outdoor catering service is provided

  • in Hotel where Declared Tariff of any Unit is More than Rs. 7,500,

  • by such Hotel (even outside Hotel like Taj provides catering service at Corporate Office for some event)

  • by Suppliers located in such hotel

Here, Hotel includes Premise also may not necessary be called Hotel like Palace.

In above scenarios, GST rate will be 18%, else 5%.


Notes:

  1. Here, though Alcohol for Human Consumption is outside preview of GST, but if it is part of outdoor catering, its value will also be included for charging GST. (due to concept of composite supply). Similarly, Rent of Premise/Hotel will also be part of such outdoor catering service only.


Important Q&A


Qns-1: What would be be GST rate for Banquet Hall Provided

a. Along with Catering Service

b. Without Catering Service


Answer:

a. In case, Banquet Hall is provided along with Catering Service, in our opinion it will attract GST rate of 5% on Total Value (Catering plus Rent) in terms of Notification No.20/2019 as discussed above. (Except in Specified Premise).


b. In case, Banquet Hall is provided independently without catering service, GST rate of 18% will be applicable.


Qns-2: Ram booked a Hotel for three days for Destination marriage of his Son. Service Provided by Hotel is Rooms for Accommodation, Banquet Hall, Catering Service etc. What would be the GST rate:

a. When Consideration is on total basis.

b. When Consideration is item wise


Answer

a. When Consideration is charged on total basis, in our opinion GST rate will be applicable as of Catering Service at 5% (except for specified Premise).


b. When Consideration is item wise, in our opinion still it is composite service which is naturally bundled and principal supply is outdoor catering service (which includes Rent of Banquet Hall in terms of N.No. 20/2019) not Hotel Accommodation Service. Accordingly, GST rate of 5% should be applicable on total value including Room rents.


However, since consideration for Room Rents is charged separately, Department may sought higher GST rate of 12% on Room Rent Component.


Qns-3: In case, hotel provides both Hotel Accommodation Service which is eligible for ITC and Restaurant Service which is not eligible for ITC. How, ITC eligibility will be computed.


Answer: Though Rule 42 (Rule for proportionate Reversal) is not applicable as this is applicable for Taxable and Exempt Supplies.


However, in our opinion, we should still follow the methodology for Reversal of ITC pertaining to Restaurant Service like:


a. Goods/Services used dedicatedly for Restaurant Service: ITC not allowed.

b. Common Goods/Services: ITC on Proportionate basis i.e. ITC on Common Goods/Services* Turnover of Restaurant/Total Turnover (Rest + Accommodation)


Qns-4: Ram booked a Room in a Hotel and along with it also use Restaurant Service in following manner:

a .Pay price of Foods (Lunch/Dinner) also along with Room Booking.

b. Book only Room and then pay separately for Lunch/Dinner by dining in the Restaurant.

c. Book only Room and then pay separately for Lunch/Dinner by dining in the Room.


Answer

a. In this case, composite value will be taxed as Hotel Accommodation Service (i.e. 12%/18%). In this case, it is also pertinent to note that in case by adding value of food, Value of Supply of Service of Room becomes more than 7500, Rate of GST will increase from 12% to 18%. (as now for determination of GST Rate on Accommodation Service is Value of Service not Declared Tariff).


b. In this case, Room Rent will be subject to GST on Accommodation Service and Food will be subject to GST on Restaurant Service.


c. In our opinion, Room Rent will be subject to GST on Accommodation Service. Further, considering the definition of Restaurant Service where it is mentioned that Food may be served away from Premise, Food also will be subject to GST on Restaurant Service.


Further, as per Explanatory Notes to classification of Service, "restaurant service‟ includes services provided by Restaurants, Cafes and similar eating facilities including takeaway services, room services and door delivery of food.


Qns-5 Supply of Ice-Creams by Ice-Cream Parlor will be considered as Restaurant Service or Supply of Goods


Answer: The same has been clarified by the Circular-164 /20 /2021-GST , in which it has been clarified that at the Ice Parlor Level, there is no component of cooking service is involved, it will be treated as Supply of Goods.


Now question comes, why it is important to determine whether it is Restaurant Service or Supply of Goods.

It is because of following Key Reasons:

a. GST Rate applicability

b. ITC Eligibility (In case Restaurant Service, ITC is not available)

c. Time of Supply is different in case of Goods & Services. (For Services, GST is payable at the time of receipt of advance but it is not the case for Goods).


Qns-6: A well Known Restaurant gets half prepared snacks items from its Factory. Now, while supplying these snacks from Factory to Restaurant in terms of Schedule-I, whether it will be considered as Restaurant Service or it will be considered as Supply of Goods.


Answer-


1. In our Opinion, here these half prepared snacks items are not ready for human consumption which is necessary condition for qualifying as Restaurant Service, therefore, it should be supplied as Goods. From Restaurant, when supplied to consumers after preparation, it will be considered as Supply of Restaurant Service.


2. In case, Factory supplied fully prepared items to Restaurant, in that case also, it should be treated as Supply of Goods as it is neither provided as part of Service nor factory is a premise meant for supplying food as a service for human consumption.


Further, in this case, From Restaurant also, it will be considered as Supply of Goods as no cooking is involved at Restaurant Level in terms of logic provided in above Circular.


We will be happy to discuss any Query in this regard, please share in Comment Section.



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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.








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