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GST On Hotels And Restaurant Services / GST On Outdoor Catering, Accommodation, Food and Beverage Services

Introduction: Accommodation, food, and beverage services are an essential part of the hospitality sector. Whether we talk about hotels, restaurants, or catering services, these services are now part of our everyday life—be it for travel, celebrations, or office functions. These services are also an important source of employment and economic activity in India. With the implementation of GST, the taxation of these services has been reorganized under a uniform system. Let’s understand these services and their taxation in a simple and clear way.

Part 1: Understanding the Sector

What Are Accommodation Services?

Accommodation services mean providing a place to stay for a person. This includes hotels, guest houses, motels, lodges, hostels, campsites, and even homestays. The stay may be for a day, a week, or even longer. The charges for such accommodation may vary depending on the class of the hotel and facilities provided like air conditioning, Wi-Fi, room service, television, breakfast, or spa services. These additional services may be offered for free or charged separately.

Some hotels provide packages like “Room with Breakfast” or “All Meals Included.” In such cases, it is called a composite supply under GST, where the main service (accommodation) includes other services like food, and the GST rate is charged accordingly.

What Are Food and Beverage Services?

Food and beverage services refer to the preparation, delivery, and serving of food and drinks to customers. These can be offered through restaurants, cafes, canteens, mess, hotels, clubs, and catering companies. It also includes takeaway and online food delivery services like Zomato and Swiggy. Some businesses serve food at fixed locations like restaurants or cafeterias, while others supply food at events, offices, or functions (called outdoor catering).

These services are often consumed along with accommodation (like hotel room + food), but can also be offered separately. For GST purposes, whether the service is offered inside a hotel or outside makes a difference in tax rate

Part 2: GST Classification and Tax Rates

GST categorizes these services under Heading 9963 – Accommodation, food, and beverage services. Based on value, place of service, and service type, the tax rates vary.

2.1 GST on Hotel Accommodation

• Declared Tariff concept (now replaced by actual value of supply) earlier caused confusion. Now, the actual price charged is the basis for tax, inclusive of amenities like air conditioning, furniture, refrigerator, etc.

2.2 GST on Restaurant Services

• Input Tax Credit (ITC) is allowed only in limited high-end categories or composite supplies in specified premises.

2.3 GST on Outdoor Catering

2.4 Railway and IRCTC Catering

Indian Railways and IRCTC or their licensees offering food services are taxed at 5% GST without ITC.

Part 3: Key Definitions and Clarifications

3.1 What Are "Specified Premises"?

“Specified premises” mean:

• Hotels, inns, guest houses, clubs, campsites, or other commercial lodging places charging ₹7,500 or more per unit per day.

Restaurant or catering services within these premises attract a higher GST rate with ITC benefit.

3.2 What Is “Composite Supply”?

A composite supply under GST means:

• Two or more naturally bundled services where one is principal and others are ancillary.

For example, renting of banquet hall + catering services is a composite supply. The tax rate applicable is that of the principal supply, often 18%.

3.3 Can Discounts Reduce Tax?

Yes. GST is calculated on transaction value, i.e., actual amount charged after all discounts, not on published tariff.

Part 4: GST Challenges in the Sector

4.1 ITC Blockages

One of the major hurdles is the non-availability of ITC for most restaurant and catering services. This increases the cost of operation, especially for standalone or low-margin restaurants.

4.2 Classification Disputes

Determining whether an event supply is outdoor catering or a restaurant service often leads to litigation, especially for services provided in clubhouses, marriage halls, or offices.

Part 5: Practical Scenarios

Scenario 1: Room With Breakfast Package

• Hotel charges ₹6,000 for a room and ₹1,000 for breakfast.
• It is a composite supply, where lodging is principal.
• Total is under ₹7,500: GST @ 12% on entire ₹7,000 (ITC allowed).

Scenario 2: Outdoor Catering at Marriage Hall

• Caterer charges ₹5 lakh for food + ₹1 lakh for hall.
• Bundled composite supply with renting of premises.
• GST @ 18%, and ITC is allowed.

Scenario 3: AC Restaurant Inside 4-star Hotel

• Room tariff: ₹8,000/day.
• Customer dines at the restaurant.
• GST @ 18% on food bill, with ITC eligibility.

Part 6: Compliance and Documentation

6.1 Invoicing Requirements

All accommodation and food service providers must issue GST-compliant invoices, clearly stating:

• SAC Code (996311 – lodging; 996331 – restaurant)
• Applicable rate
• GSTIN
• Whether ITC is available

6.2 Return Filing

Monthly return filing under GSTR-1 and GSTR-3B is mandatory. Annual returns under GSTR-9 may apply for those crossing turnover thresholds.

6.3 Registration Threshold

Businesses providing such services must register under GST if:

• Turnover exceeds ₹20 lakhs (₹10 lakhs for special category states)

Conclusion

The accommodation, food, and beverage services sector is dynamic and multifaceted. While GST aims to simplify tax administration through standard rates, variations in service type, bundling, and value have led to multiple tax rates, compliance challenges, and litigations.

A simplified GST structure with more uniformity in rate and broader ITC availability can support the sector’s growth and reduce the tax burden on both service providers and end consumers.

Understanding the detailed GST impact on your specific type of accommodation or food service is essential to ensuring correct classification, optimal pricing, and legal compliance.

Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.