In the vibrant world of Indian hospitality and food services, delivering top-notch experiences is key. But behind the scenes, dealing with Goods and Services Tax (GST) can be a headache. From budget hotels to fancy restaurants, understanding GST rates and Input Tax Credit (ITC) is crucial. Let’s break it down:
Types of Services and Applicable GST Rates:
Hotels:
– Budget Hotels (Room Tariff ≤ Rs. 1,000 per day): Exempt from GST.
– Hotels (Room Tariff > Rs. 1,000 but ≤ Rs. 7,500 per day): 12% GST with Input Tax Credit (ITC) available.
– Luxury Hotels (Room Tariff ≥ Rs. 7,500 per day): 18% GST with ITC available.
Restaurants:
– Standalone Restaurants or Restaurants within Budget Hotels: 5% GST without ITC (composition scheme option available for restaurants with turnover up to Rs. 1.5 crore).
– Restaurants within Hotels (Room Tariff > Rs. 7,500 per day): 18% GST with ITC available.
Outdoor Catering Services:
– Standalone or within Budget Hotels: 5% GST without ITC (composition scheme option available with turnover restrictions).
– Within Hotels (Room Tariff > Rs. 7,500 per day): 18% GST with ITC available.
Understanding Input Tax Credit (ITC):
ITC allows businesses to claim credit for GST paid on purchases used for providing taxable services, reducing the overall GST liability. However, the 5% GST rate for standalone restaurants and outdoor catering does not allow ITC claims.
Benefits of opting for the Composition Scheme:
For restaurants with a turnover below Rs. 1.5 crore, the composition scheme offers a simplified tax filing process with a lower tax rate of 5%. However, in the Composition Scheme, restaurants cannot collect GST from customers, and ITC is not available. This simplifies tax filing compliance but shifts the burden of GST onto the restaurant.
Simplified Table of GST Rates:
(Service Type / Room Tariff (per day) / GST Rate / ITC Eligibility)
– Budget Hotels ≤ Rs. 1,000 / Exempt / Not Applicable
– Hotels > Rs. 1,000 but ≤ Rs. 7,500 / 12% / Yes
– Luxury Hotels ≥ Rs. 7,500 / 18% / Yes
– Standalone Restaurants / – / 5% / No
– Restaurants (in Hotels) > Rs. 7,500 / 18% / Yes
– Standalone Outdoor Catering / – / 5% / No
– Outdoor Catering (in Hotels) > Rs. 7,500 / 18% / Yes
Reference: Notification No. 20/2019-Central Tax (Rate) dated 30th September 2019
In conclusion, understanding the nuances of GST rates and ITC eligibility is essential for businesses in the Indian hospitality and food service industry to ensure compliance and maximize tax benefits. By simplifying the complexities of GST, businesses can focus on delivering exceptional experiences to their customers while effectively managing their tax obligations.
This article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc if any.
