GST on Hotels, Restaurants and Hospitality Services — Rates and ITC Guide 2025

The hospitality industry — hotels, restaurants, resorts and related services — operates under specific GST rates that have been revised multiple times since 2017. The current structure effective from 2022 links hotel GST to actual room tariff charged, not declared tariff. Here is the complete guide for hospitality businesses.

GST on Hotel Accommodation

• Room tariff (transaction value) up to ₹7,500 per room per day: Nil GST
• Room tariff above ₹7,500 per room per day: 18% GST

Important change from 2022: Earlier, the threshold was ₹2,500 (5% GST) and ₹7,500+ (18% GST). The nil slab for below ₹7,500 was introduced to ease the burden on the hospitality sector. GST applies on the "transaction value" (actual price charged) — not the declared tariff.

GST on Restaurants

• Standalone restaurants (AC or non-AC): 5% GST (without Input Tax Credit)
• Restaurants in hotels with room tariff above ₹7,500 per day: 18% GST with ITC
• Outdoor catering services: 5% GST (without ITC)
• Restaurants under composition scheme: 5% (if eligible for composition)

ITC for Hotel and Restaurant Business

The 5% rate restaurants CANNOT claim ITC on inputs (food ingredients, packaging materials, kitchen equipment). Only those charging 18% (restaurants inside qualifying hotels) can claim ITC. This is by design — ITC restrictions fund the lower consumer tax rate.

GST on Other Hospitality Services

• Convention services (conferences, meetings) in hotels: 18% with ITC
• Banquet hall hire: 18% with ITC
• Accommodation in dharamshalas/charitable institutions for religious purposes: Exempt (up to 1,000/day)
• Tour operator services: 5% (no ITC) or 18% (with ITC) depending on the nature

GST Registration for Hotels and Restaurants

Hospitality businesses must register for GST if turnover exceeds ₹20 lakh (₹40 lakh for purely goods suppliers — but restaurants are service providers so the ₹20 lakh threshold applies). Hotels in Kerala must also follow Kerala state GST (KGST) provisions.

Conclusion

Hospitality GST requires careful tracking of room tariff per day to determine the correct rate, plus discipline around ITC restrictions for restaurants. SPOTON provides complete GST compliance solutions for hotels, resorts and restaurants across Kerala. Contact us for expert hospitality sector GST services.