5% GST for restaurants with non-specified premises: Finance Ministry

Mar 27, 2025

Option of 5% GST without ITC or 18% with ITC to be applicable on restaurant services provided at non-specified premises, clarifies FinMin

The goods and services tax (GST) rate of 5 per cent without input tax credit will apply to restaurant service supplied outside the premises or at those other than specified premises, the finance ministry on Wednesday said.

Meanwhile, the rate of 18 per cent with input tax credit will be imposed on restaurant service supplied at specified premises.

A hotel that offers a room at more than ₹7,500 a day or equivalent supplied in a financial year becomes specified premises for the subsequent financial year.

Suppliers of hotel accommodation service, whether an existing registrant or a new applicant, have been given the option to declare the premises from which supplies are made/will be made — as a specified premise for a financial year.

“This amendment means in case a small hotel in FY25 has sold even one room at more than ₹7,500 per day, in the next year it has to charge 13 per cent GST extra to the consumers. This would make restaurants in smaller hotels unfeasible vis-a-vis standalone hotels. It is well known from precedents that an unduly high tax regime in any sector makes it evasion-prone,” said Vivek Jalan, partner with Tax Connect Advisory Services.

According to Saurabh Agarwal, partner with EY, hotels can opt for the specified-premises classification if the value at which it offers rooms doesn’t exceed ₹7,500 in the previous financial year.

[The Business Standard]