Hotel Restaurant GST: When Is It 5% or 18%?
Published
A hotel restaurant should not switch between 5% and 18% GST whenever its room prices change. Check its specified-premises status before changing the billing setup.
What decides whether a hotel restaurant charges 5% or 18%?
For restaurant service, the main distinction is whether the restaurant operates at specified premises. The correct rate is generally 5% outside those premises and 18% at them. Air-conditioning and the price of a given dish do not decide this status.
Consider two restaurants serving a ₹1,000 meal before tax. At 5%, GST adds ₹50, giving a ₹1,050 total. At 18%, it adds ₹180, giving ₹1,180. These examples illustrate rates, rather than a choice owners can make for each customer.
The restaurant tax entries sit under heading 9963 in the official CBIC service-rate table. Check the correct status before selecting a rate in your billing software. A menu description or room booking alone cannot complete that review.
How does the preceding financial year decide specified premises?
From 1 April 2025, the automatic test looks backwards. A premises qualifies if any accommodation unit supplied there in the preceding financial year exceeded ₹7,500 per unit per day. Exactly ₹7,500 does not cross that threshold.
For FY 2026–27, review FY 2025–26 room sales. A qualifying ₹8,000 room supply in that earlier year can set the current year’s status. A ₹6,500 room sold today does not reverse it.
The change appears in Notification 05/2025-Central Tax (Rate), dated 16 January 2025, pages 1–4. It also permits specified status through a valid voluntary declaration. Review both routes before concluding that a premises falls outside the category.
Can a hotel voluntarily choose specified-premises treatment?
Yes, through the prescribed declaration process. Existing registered hotel suppliers file during 1 January–31 March before the relevant financial year. New registration applicants have 15 days after acknowledgement. Declarations concern each site and continue until validly opted out.
A hotel without a preceding-year room supply above ₹7,500 may therefore still have specified status. Ask for its declaration record before setting up the restaurant. An opt-out cannot defeat the automatic threshold when that test applies.
Why should the restaurant avoid daily rate switching?
The financial-year test is different from watching today’s booking screen. A discounted room, a busy weekend, or a seasonal price increase does not create daily restaurant rate changes. Keep a written status decision with the tax year shown.
For example, a resort may sell rooms at ₹6,000 on weekdays and ₹9,000 during a festival. Its restaurant should not alternate rates every Friday and Monday. The accountant should review the right annual evidence and declarations instead.
Give the cashier one approved note for the meal supply being billed. Record who confirmed it and when the next annual review is due. This avoids turning every room discount into a tax-setting decision during service.
Are hotel rooms taxed using the same annual restaurant test?
No. Basic hotel room supply has its own value-based rate entry. From 22 September 2025, room stays up to ₹7,500 per unit per day attract 5%; room stays above that attract 18%. This is separate from restaurant premises status.
See Notification 15/2025-Central Tax (Rate), dated 17 September 2025, page 1. Do not carry an old 12% room slab into a current guide. Also avoid applying room calculations by default to meals bundled into a room package.
A ₹6,000 room and a separately sold ₹1,000 restaurant meal need not share the same rate. Check each supply under its own entry. Packages, banquet contracts and outdoor catering need their own review rather than this article’s simple meal example.
What input tax credit is available from November 2026?
From 1 November 2026, describing the 5% restaurant rate as allowing no credit whatsoever is outdated. A narrow exception permits input-service credit for restaurant service purchased from another provider outside specified premises. Basic goods, including ingredients and equipment, remain restricted under that entry.
This is not general credit on every business purchase. See Notification 06/2026-Central Tax (Rate), dated 27 October 2026, printed pages 6–7, effective 1 November 2026. Have the accountant check allowed invoices rather than treating every kitchen expense as deductible.
The 18% restaurant entry permits credit subject to normal GST eligibility and restrictions. Charging 18% does not make every purchase creditable. Keep the output-rate decision and the input credit review as separate accounting tasks.
Does an out-of-state guest make the restaurant bill IGST?
An out-of-state guest does not, by itself, make a locally sold meal an interstate supply. Restaurant place of supply follows where the service is actually performed. Hotel stays follow the property location under the right rule.
For example, a Bengaluru guest eating at a Jaipur hotel does not trigger IGST merely by providing a Karnataka address. Check supplier location and the correct place-of-supply rule. See IGST Act section 12(3)–(4).
How do you put the confirmed restaurant rate into Biller.app?
First, get the status and rate confirmed. Biller.app applies the taxes you set up; it does not on its own decide your legal GST treatment. Suggested menu-item rates and HSN codes also require your review and confirmation.
Open Outlet, then Taxes & charges, and select the appropriate available GST preset. Biller.app creates the tax lines and shows the combined rate as one card. Check the printed CGST and SGST split before saving. The Taxes & charges guide explains the controls.
Choose which taxes apply to each table or counter. Marking a tax as default affects newly created tables and counters. Use the separate existing-tables option where appropriate. Do not assume a default on its own repairs every counter already serving customers.
For a ₹1,000 taxable meal at 5%, check ₹25 CGST and ₹25 SGST on a normal local bill. At 18%, check ₹90 for each component. Compare the preview with the accountant’s note before opening the counter.
What product limits should the restaurant remember?
A restaurant outlet keeps one GST rate per bill. Mixed item rates are documented for shop outlets instead. Do not promise that one restaurant bill can solve every combination of meals, separately classified goods and special supplies.
The GST billing guide explains GST settings, tax invoices and inclusive pricing. Biller.app does not generate e-invoices or IRNs, and it does not file GST returns. Those tasks remain with you or your accountant.
Biller.app supports exports in GST portal table shapes. Set Composition scheme or Not registered only when that accurately reflects the outlet’s position. New bills then use Bill of Supply formatting without tax lines; changing the setting does not rewrite existing bills.
For inclusive menu prices, confirm the item’s pricing setting before testing the total. Changing the default pricing style affects new items, rather than repricing your existing menu. Use the GST Calculator guide for a separate arithmetic check.
What should you check before the next service?
Keep the financial-year status note, past room records and any declaration together. Confirm the restaurant rate, GST setting and right counters. Then check a sample invoice with a familiar ₹1,000 taxable value. Keep settled records when correcting the setup.
If your restaurant has been switching rates with daily room prices, stop and check the rule. Review affected bills with the accountant before deciding on corrections. Do not silently rewrite historical figures or assume a new preset resolves past compliance.
FAQ
Does a ₹7,500 room on its own trigger 18% restaurant GST?
No. The automatic preceding-year threshold is above ₹7,500. A valid voluntary declaration can also set specified status.
Can cheaper rooms today bring the restaurant back to 5%?
No daily switch follows from a cheaper room booking. Check the premises status for the financial year and any continuing declaration.
Can a 5% restaurant claim credit on ingredients?
The narrow November 2026 exception concerns allowed purchased restaurant services. It does not open basic ingredient or equipment credit under the 5% entry.
Does Biller.app decide the legal rate or file returns?
No. You confirm the correct treatment and set it up. Biller.app applies the settings but does not generate IRNs or file GST returns.
Once the rate is confirmed, start billing free, no signup, and check a sample bill before using the setup during service.
This is for single-counter and multi-outlet restaurants and shops across India, including hotel restaurant operators. Biller.app is free to start with 510 Biller credits once, without a card. A plain bill uses one credit, and credits never expire.