The Central Board of Indirect Taxes and Customs (CBIC) has issued the Frequently Asked Questions (FAQs) on ‘restaurant service’ supplied at ‘specified premises’ under GST.
From 01.04.2025, the definition of “specified premises” for a financial year includes:
- Price-based criteria: Any premises where hotel accommodation services were provided in the previous financial year, with a unit price exceeding ₹7,500 per day.
- Voluntary declaration by existing suppliers: A registered hotel service provider can declare their premises as “specified premises” between 1st January and 31st March of the preceding financial year.
- Declaration by new applicants: A person applying for registration can declare their premises as “specified premises” within 15 days of receiving the registration application acknowledgment.
In short, a premises automatically qualifies as “specified premises” if it meets the price criteria. Additionally, both existing and new hotel service providers have the option to voluntarily declare their premises as “specified premises” for a financial year.
The Board has clarified that Entry 7(vi) of notification No. 11/2017-CTR dated 28.06.2017 prescribes the rate of 18% with ITC for restaurant services supplied at specified premises. For restaurant services supplied outside specified premises, the rate of 5% without ITC is applicable as per entry 7(ii) of notification No. 11/2017-CTR dated 28.06.2017.
For the period prior to 01.04.2025, “specified premises” shall mean premises providing ‘hotel accommodation’ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.
For the period prior to 01.04.2025, “declared tariff” shall mean charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.
With effect from 01.04.2025, the definition of “declared tariff” shall be omitted.
For the period starting from 01.04.2025, the value of supply of hotel accommodation in the previous FY, i.e., the transaction value charged for the said supply, would be the basis for determining whether the premises providing hotel accommodation service mandatorily falls under the category of ‘specified premises’ or not in the current FY. The revised definition of ‘specified premises’, to be brought into effect from 01.04.2025, has been worded accordingly.
A registered person supplying hotel accommodation service can file a declaration declaring the premises, from which the hotel accommodation services are supplied, to be a ‘specified premises’, for a financial year. This declaration will be required to be filed in the format notified as Annexure VII to Notification No. 11/2017-CT(Rate) dated 28.06.2017. This declaration will have to be filed between 1st January and 31st March of the financial year preceding the financial year for which the registered person intends to declare the premises as ‘specified premises’.
A declaration can also be filed by a person applying for registration (who intends to supply hotel accommodation services) declaring the premises, from where hotel accommodation services are to be supplied, to be a ‘specified premises’. This declaration will be required to be filed in the format notified as Annexure VIII to Notification No. 11/2017-CT(Rate) dated 28.06.2017. This declaration will have to be filed within 15 days of obtaining acknowledgement (ARN) of the application for registration in FORM GST REG-02.
Illustration: ‘A’ (an unregistered person) is starting a new business wherein he intends to supply hotel accommodation service from his premises and also wants to operate as a ‘specified premises’. He applies for GST registration on 02nd May, 2025 and receives ARN number on 02nd May, 2025. He has to file the declaration Annexure VIII, within 15 days, i.e., on or before 16th May, 2025 before the jurisdictional authority.
Anyone who is not supplying/intending to supply hotel accommodation service cannot file this declaration.
Illustration: A mall owner, who may have rented out part of his mall premises to a supplier of hotel accommodation service as well as to other multiple restaurants operating from his/her mall, would not be eligible to file this declaration as he himself is not a supplier of hotel accommodation service. The supplier of hotel accommodation service operating in this mall can declare the premises from which hotel accommodation services are supplied as a specified premises. This will make the restaurants located in the said hotel premises liable to pay tax at the rate of 18% with ITC. Restaurants located in the mall, but outside the said hotel premises, will not be affected by this declaration, and will continue to pay GST at the rate of 5% without ITC.
If you have supplied a unit of accommodation at value above Rs. 7,500/- in the preceding financial year, then you automatically and mandatorily fall under the scope of ‘specified premises’ for the current financial year, and you need not file a declaration to this effect.
Objective Behind Amendment
The objectives of the change in the definition of “specified premises” with effect from 01.04.2025, as per Notification No. 05/2025-Central Tax (Rate) dated 16.01.2025, are as follows:
- Aligning with Dynamic Pricing Model
- The amendment replaces ‘declared tariff’ with ‘value of supply’ (transaction value) in the definition of specified premises.
- This aligns with the GST rate determination for hotel accommodation, which is based on the actual transaction value rather than a fixed tariff.
- Given that the hotel industry now follows a dynamic pricing model, this change ensures consistency in taxation.
- Certainty in Specified Premises Classification
- The status of “specified premises” for a hotel in the current financial year (FY) will be determined based on the value of supply of accommodation units in the previous FY.
- This provides predictability and stability for hotel businesses by ensuring they know their tax obligations at the beginning of the FY.
- Optional Declaration as Specified Premises
- Hotels now have the option to declare their premises as “specified premises.”
- This enables restaurants in such premises to charge GST at 18% with Input Tax Credit (ITC), instead of the lower rate of 5% without ITC.
- This provides flexibility and benefits to hotels and restaurants looking to avail ITC benefits.
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