Starting from April 1, 2025, if you dine at hotel restaurants, your bill might increase. Under a new government rule, restaurants in hotels located in specified premises will now charge 18% GST, up from the previous 5%.
What Are Specified Premises?
The government defines specified premises as hotels where the rent of any room was more than Rs 7,500 per day in the last financial year.
Additionally, hotels can declare themselves as specified premises. Restaurants in these hotels will now be required to charge 18% GST, but they will also benefit from input tax credit (ITC).
Will It Affect Customers?
Experts suggest that the 18% GST might lead to higher prices for customers. However, food prices may not always go up.
If a hotel already pays up to 12% GST on raw materials and services, it can offset some costs using ITC.
If the hotel uses common goods and services (like soap, water, and cleaning items) for both the hotel and restaurant, it could reduce the impact and avoid passing on the tax to customers.
Who Gets the 5% GST?
Hotel restaurants that do not fall under the specified premises category can continue with the 5% GST or choose to pay 18% GST with ITC.
Business Events Will Get Costlier
Food and drinks at corporate events, meetings, and conferences held in hotels may become more expensive.
If just one room costs more than Rs 7,500, the entire hotel will be considered a specified premises, so 18% GST will apply to the restaurant too.
Hotel owners can now decide which properties should be classified as specified premises.
The new rule also clarifies tax responsibilities for restaurants offering services through e-commerce platforms like Zomato and Swiggy.
The new GST rule introduces a dual tax system: 18% GST for specified premises and 5% GST for others.
Customers will need to be aware of the tax rate before dining at a hotel, and hotels will need to adjust their pricing, packages, and ITC strategies to avoid passing on extra costs to customers.
