GST on Hotel Restaurants or GST rate on Restaurants Canteen or Place of supply in Case of Hotel Restaurant
In this article we will discuss in detail about burning issues (including GST Rate on Hotel & Restaurants) of GST relating to Hotel, Restaurant and Outdoor catering industry. We have categorised this write up in 4 broad categories which are as follows:
- Place of supply for Restaurant service, Hotels and Outdoor Catering services,
- Applicable GST rate and exemptions (GST Rate on Hotel & Restaurants )
- Availability of ITC
- Filing of GST returns
Place of Supply :
As per Section 7(3) of IGST Act: A supply will be treated as inter-state supply “when “location of supplier” and “place of supply” are not in the same state or same union territory.”
As per Section 8(2) of IGST Act: A supply shall be treated as intra-state supply of goods “where the location of the supplier and the place of supply of goods are in the same State or same Union territory”
In general, Place of supply of services is the “location of recipient” under GST, but in some specific services, place of supply depends upon the nature of transaction which are classified in section 12(3) of CGST Act. (At below part of this blog you will find about GST Rate on Hotel & Restaurants )
As per Section 2(14) of IGST Act: Location of the recipient of services” means,
- Where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;
- Where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
- Where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
- In absence of such places, the location of the usual place of residence of the recipient;
In case of Hotels and Restaurant place of supply is specifically defined in section 12(3) of CGST Act 2017 which is as follow
| S. No. | Nature of Service | Place of Supply |
| 1. | Services related to Immovable property, including hotel accommodation | Location at which the immovable property is located or intended to be located if located outside India then location of the recipient |
| 2. | Restaurant and catering services | Location where these services are actually performed |
Let’s take some examples to understand the same:
Example 1
- “Hotel Himalaya” is situated in Uttarakhand and “A” who is registered in Delhi come for business purpose in Uttarakhand stays in that hotel Himalaya.
- In that case Location of Supplier is Uttarakhand as Hotel is registered in Uttarakhand
- Location of Recipient is Delhi as he is registered in Delhi, but as per provisions of Section 12(3) location of recipient (location of A) will be ignore while determining place of supply of Hotel Services as POS is specifically defined in case of Hotel and relating services.
- Hence the place of supply will be Uttarakhand only, as hotel is Situated/Located in Uttarakhand
- Location of supplier is Uttarakhand and place of supply is also in Uttarakhand hence that transaction will be treated as intrastate transaction and supplier will charge CGST & SGST.
Example 2
- “Saddha Restaurant” is situated in Punjab and “A” registered in Delhi come for business purpose in Punjab and had his dinner in that Restaurant.
- In that case Location of Supplier is Punjab as performance of service (Dine in) is in restaurant which is located in Punjab
- Location of Recipient is Delhi as he is registered in Delhi, but as per provisions of Section 12(3) location of recipient will be ignore while determining place of supply for Restaurant Services.
- Hence the place of supply will be Punjab only as restaurant services are actually performed at restaurant situated at Punjab.
- Location of supplier is Punjab and place of supply is also in Punjab hence that transaction will intrastate transaction and supplier will charge CGST & SGST.
Example 3
In above both the cases if recipient is located in Uttarakhand & Punjab respectively then also place of supply will be Uttarakhand & Punjab and transactions will be intrastate (Local) only. Hence we can say in both the services, place of supply will be the place where hotel or restaurant situated
Example 4
If restaurant is providing home delivery services to other States i.e. from Gurgaon, Haryana to Delhi then the place of supply will be Delhi only as food was ultimately consumed in Delhi irrespective of fact that food was cooked and packed in Haryana.
Example 5
An individual visited to a Restaurant located in Noida and took home delivery order then in this case transaction will be treated as intrastate supply however such consumer took these goods to other Delhi
GST Rates: (GST Rate on Hotel & Restaurants)
GST rate in case of Hotel, Inn, guest house, home stay, club or campsite depends upon the price that they actually charge from customer. CBIC has categorised GST rate into 3 broad categories which are as follows:
| Transaction Value per day per room | GST Rate |
| Up to Rs.999/- | Nil |
| Rs.1,000 to 7,499/- | 12% |
| Rs. Above 7,499/- | 18% |
GST rates for Restaurant:
Earlier the tax rate was 18% for restaurants with air-conditioning and 12% for those without air-conditioning and not having license to serve liquor.
Now restaurants are liable to charge GST @ 5% on their supply of foods or drinks, whether it’s dine-in facility or take away facility. However if restaurant is located in a hotel/Inn etc then GST rate would be 18%.
GST rate for catering services:
Catering services are liable for GST at 18%.
Input Tax Credit:
Input Credit for Hotels or other accommodation services:
Hotels or Inn or any other accommodation service provider can claim input credit as there are no restrictions are provided to claim input credit. However credit will not be available if such credit falls under section 17(5) of CGST Act or other similar provisions.
Input Credit for Restaurant Services:
If a restaurant is discharging their tax liability at 18% then there is no restriction on availability of Input Credit. However if applicable tax of rate on outward supplies is 5% then input tax credit will not be allowed.
Input Credit for Catering Services:
Catering service provider can claim input tax credit of all eligible inward supplies.
Input Tax Credit for recipient of Services:
Input Credit of Accommodation services (Hotel, Inn etc.) will be allowed under GST. In example no 1 Input Credits will not be allowed as A is registered in Delhi and tax charged by Hotel is CGST & SGST (Tax of Punjab) hence A will not be eligible to avail input credit. So If recipient wants to avail input credit of hotel services then have to stay in a hotel which is same state where recipient is registered.
As per Section 17(5) (b) (i) of CGST Act 2017 input credit of food and beverages services will not be allowed except where an inward supply of goods or services or both of a particular category (food and beverages) is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
Conclusion:
Restaurants services was part of litigation under service tax and vat laws relating to their applicable rate of tax which depends upon various factors like Air condition facility, take away or dine, liquor facility etc. Under GST government tried to reduce such ambiguity and prescribed fix rate for restaurant @ 5% whether it’s home delivery or take away except when restaurant is located in hotel.