The hospitality sector, encompassing hotels, restaurants, and catering services, has undergone significant changes in the GST regime with effect from April 1, 2025. The amendments introduced by Notification No. 5/2025-Central Tax (Rate) and Notification No. 08/2025 – CT (Rate) Dated 16-01-2025 have altered the tax rates and compliance requirements for businesses operating in this domain.
GST Rates Prior to 01/04/2025
Hotel Industry – Room Rent
Before the amendments, GST rates for hotel accommodations were structured as follows:
- Room rent up to Rs. 7,500/- per day: 12% GST with full ITC.
- Room rent above Rs. 7,501/- per day: 18% GST with full ITC.
- Applicable under Heading 9963 (Accommodation, Food, and Beverage Services).
Restaurant Industry
- Standalone Restaurants: 5% GST without ITC.
- Food parcels/takeaways: 5% GST without ITC.
- Restaurants in hotels where room rent is less than Rs. 7,500/- per unit per day: 5% GST without ITC.
- Restaurants in hotels where room rent is Rs. 7,500/- or more (even for a single room): 18% GST with full ITC.
- Indian Railways Catering and Tourism Corporation Ltd. (IRCTC) and its licensees: 5% GST without ITC.
Catering Services
- Outdoor catering services (except in specified premises): 5% GST without ITC.
- Catering in premises where unit accommodation is Rs. 7,501/- or above per day: 18% GST with full ITC.
Ice Cream Parlours
- Ice cream parlours were classified separately under Circular No. 177/09/2022-TRU dated 03-08-2022 and Circular No. 164/20/2021-GST dated 06-10-2021.
- GST rate applicable: 18% with full ITC.
- The rationale: Ice cream parlours primarily sell already manufactured ice cream and do not have the character of a restaurant.
Key Amendments Introduced by Notification No. 5/2025 – Central Tax (Rate)
One of the most significant changes introduced in the GST framework is the introduction of the “Specified Premises” concept.
Definition of “Specified Premises”
A premises qualifies as a “Specified Premises” if:
- In the preceding financial year (FY 2024-25), the supplier provided hotel accommodation services where the value of supply of any unit of accommodation exceeded Rs. 7,500 per unit per day.
- A registered person files a declaration between January 1 and March 31 of the preceding financial year declaring the premises as “specified premises”.
- A newly registered person files a declaration within 15 days of obtaining an acknowledgment for registration declaring the premises as “specified premises”.
Mandatory Declarations for “Specified Premises”
Different annexures have been introduced under Notification No. 5/2025, requiring businesses to declare their status before the jurisdictional GST authority:
| Annexure | Purpose | Who Must File? |
| Annexure VII | Opt-In Declaration | Registered persons declaring their premises as “specified premises” before March 31, 2025. |
| Annexure VIII | Opt-In Declaration (New Registration) | New registrants declaring their premises as “specified premises” within 15 days of registration. |
| Annexure IX | Opt-Out Declaration | Registered persons opting out of “specified premises” classification. |
GST Rates for Hotel & Restaurant Services w.e.f. 01/04/2025
The revised GST rates effective from April 1, 2025, are as follows:
| Sr. No. | Category | GST Rate | ITC Availability |
| 1 | Standalone Restaurants | 5% | No ITC Allowed |
| 2 | “Specified Premises” (Room Rent Above Rs. 7,500 & Catering Services) | 18% | ITC Allowed |
| 3 | Hotel Accommodation (Room Rent Up to Rs. 7,500) | 12% | ITC Allowed |
Implications of the Amendments
- Compliance Requirements for Hotels with Room Rent Above Rs. 7,500
- Hotels where any unit of accommodation had a room rent exceeding Rs. 7,500 in FY 2024-25 must file Annexure VII (Opt-In Declaration) before March 31, 2025.
- Failure to file the declaration may lead to incorrect GST application and compliance issues.
- Change in Tax Liability for Restaurants in “Specified Premises”
- Restaurants located in specified premises (i.e., hotels with a room rent exceeding Rs. 7,500 per day in the preceding financial year) are now subject to 18% GST with ITC, instead of the earlier 5% without ITC.
- This increases compliance burdens but allows ITC benefits.
- Change in Tax Collection Mechanism for E-Commerce Operators
- Notification No. 08/2025 – CT (Rate) removes the Reverse Charge Mechanism (RCM) liability for E-Commerce Operators (ECOs) under Section 9(5) of the CGST Act.
- Previously, platforms like Zomato and Swiggy were liable to collect and pay GST for restaurant services. Now, restaurants in “specified premises” must pay GST at 18% under forward charge.
- No Change for Standalone Restaurants
- Standalone restaurants continue to be taxed at 5% GST without ITC.
- The relief here is that businesses not operating from “specified premises” face no additional compliance burden.
- Implications for Small and Medium Hotels
- Hotels with a room rent below Rs. 7,500 per day do not need to file an Opt-In Declaration.
- Such businesses will continue to pay 12% GST with ITC, maintaining their existing compliance framework.
Conclusion
The amendments introduced by Notification No. 5/2025 and Notification No. 08/2025 mark a significant shift in GST compliance for the hospitality industry. Hotels charging above Rs. 7,500 per day per unit in the previous financial year must adhere to the “Specified Premises” concept and file declarations accordingly. Restaurants in these premises will now bear an 18% GST liability with ITC, and E-Commerce Operators are relieved from tax liability under RCM.
Businesses in this sector must act swiftly to assess their tax positions, ensure timely filing of required annexures, and adapt to the new compliance landscape to avoid any future tax complications.
