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Treading GST Path - XXXVII - GST on Hotels

 

NOVEMBER 20, 2017

By G Natarajan, Advocate, Swamy Associates

THE rate of GST payable by different types of Hotels / Restaurants, has undergone a lot of changes vide Notification 46/2017 Central Taxes (Rate) Dt. 14.11.2017, with effect from 15.11.2017 and an attempt is made in this article to explain the changes.

As per S.No. 7 of Notification 11/2017 Central Taxes (Rate) Dt. 28.06.2017, with effect from 01.07.2017, the various Hotel related transactions are subjected to different rates of GST under nine (9) categories, which are tabulated below in simple language. The total rate of GST including the corresponding SGST rates is mentioned in the table.

S.No.

Nature of Service

Rate of GST (CGST + SGST or IGST)

Remarks

 

Food related services.

   

(i)

Supply of food in a restaurant, which is not having the facility of air-conditioning / central heating / licence to service alcoholic liquor

12 %

S.No. 7 (i) of Notification 11/2017

(ii)

Supply of food in a restaurant, which is having licence to service alcoholic liquor

18 %

S.No. 7 (iii) of Notification 11/2017

(iii)

Supply of food in a restaurant, which is having the facility of air-conditioning / central heating

18 %

S.No. 7 (iv) of Notification 11/2017

(iv)

Outdoor catering

18 %

S.No. 7 (v) of Notification 11/2017

(v)

Supply of food, along with renting of place (Convention, meetings, etc)

18 %

S.NO. 7 (vi) of Notification 11/2017

 

Accommodation Related Services

   

(i)

Accommodation in Hotels, etc. where the declared room tariff above Rs.1000 per day and below Rs.2500 per day

12 %

S.No. 7 (ii) of Notification 11/2017

(ii)

Accommodation in Hotels, etc. where the declared room tariff above Rs.2500 per day and below Rs.7500 per day

18 %

S.No. 7 (vi) of Notification 11/2017

(iii)

Accommodation in Hotels, etc. where the declared room tariff above Rs.7,500 per day

28 %

S.No. 7 (viii) of Notification 11/2017

(iv)

Accommodation, Food and beverage Services, other than those covered above

18 %

S.No. 7 (ix) of Notification 11/2017

It may be observed from the above that the GST rate for food related services was based on whether the restaurant is having the facility of air-conditioning / central heating / licence to service alcoholic liquor, or not. If any of these facilities are not available, the rate would be 12 % and if any one of these facilities are available, the rate of GST would be 18 %.

The above entry S.No. 7 has been amended vide Notification 46/2017 Central Taxes (Rate) Dated 14.11.2017 with effect from 15.11.2017. It may be observed that the relevance of availability of the facilities of air conditioning / central heating / licence to service alcoholic liquor, to determine the GST rate has been completed dispensed with . But, the rate of GST would depend upon the declared tariff of the room in the place. But there are lot of Restaurants without any lodging facility and what GST rate would apply for such restaurants? We will come back to this question little later.

To tabulate the changes -

S.No.

Nature of Service

Rate of GST (CGST + SGST or IGST)

Remarks

 

Food related services.

   

(i)

Supply of food in a restaurant, which is located in a lodging premises, where the declared tariff per room is below* Rs.7,500

5 %

Without availing any ITC. S.No. 7 (i) of Notification 11/2017, as amended by Notification 46/2017

(ii)

Supply of food in a restaurant, which is located in a lodging premises, where the declared tariff per room is above Rs.7,500

18 %

S.No. 7 (iii) of Notification 11/2017 as amended by Notification 46/2017

(iii)

Accommodation, Food and beverages services not covered under any of the entries under S.No. 7

18 %

S.No. 7 (ix) of Notification 11/2017 as amended by Notification 46/2017.

* Seems the intention is to mention below, but the notification reads as "above" which seems to be an error.

Coming back to the above question, as to what would be the rate applicable for stand-alone restaurants, which do not have any lodging facility, the explanation under S.No. 7 (iii) provides an answer, which is reproduced below.

Explanation.- For the removal of doubt, it is hereby clarified that, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent shall attract central tax @ 2.5% without any input tax credit under item (i) above and shall not be levied at the rate as specified under this entry.

So stand-alone restaurants would attract 5 % GST, if they do not avail any ITC. They have to pay 18 % if they avail ITC, as per S.No. 7 (ix).

Now, the next question is if a restaurant situated in a lodging facility where rooms of different categories are available, where the declared tariff of some of the rooms are below Rs.7,500 per day and some of them are above Rs.7,500 what rate of GST would apply?

A careful reading of the entries reveal that if the declared tariff of "any unit" is above Rs.7,500, then the rate would be 18 %.

It may also be noted that the above rates would apply for take away food also, as consumption of both " in*" or "away" from the Hotel is covered.

* Instead of the word "in", the word "on" is used.

Certain nagging questions -

Next question is - what would the GST rate, if food is ordered through room services, by a person who is staying in a Hotel. Whether the supply of food in that case has to be treated as a composite supply, along with accommodation and since the principal supply being accommodation, the rate applicable for accommodation (depending upon the declared tariff) would apply or the GST rates separately prescribed for food supply would apply?

What if he, instead of ordering through room service, goes to the restaurant and takes his food, what would be the rate?

It may be noted that under S.No. 7 (v) outdoor catering would attract 18% and this has not undergone any change. The term "outdoor catering" has not at all been defined in GST law. If so, in what circumstances 18 % rate under S.No. 7 (v) would apply? What is the status of factory canteens run by contractors? What about Home delivery of food?

(The views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

 


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: No option for restaurants to charge 18 percent with ITC

Sir, from November 15, 2017 onwards, all restraunts and takeaways are mandatorily required to pay tax @ 5% without any input tax credit. This is evident from the explanation to entry no.7 (ix) of the notification no. 46/2017-Central tax (rate) dated November 14, 2017. Accordingly, it appears that there is no option available for stand-alone restaurants to charge 18% and avail credit.

Posted by PricewaterHouse Coopers
 
Sub: Standalone Restaurants

Sir,
In substituted S.No.7 (i)there seems to be no error in using "above" instead of "below", phrase used is other than.. 7500 and above, so it includes below 7500 as well as standalone restaurants.
The explanation added in substituted (ix) makes it clear that tax shall be 5%,there is no option or scope to charge 18%. It is also reinforced by not including (i) in the residual entry (ix)of S. No.7, though all other besides (i) and omitted (iv) are included therein.






Posted by GURJIT BHULLAR
 
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