With effect from 1st April 2025, the GST rate structure on restaurant services has been revised under Notification No. 05/2025 – Central Tax (Rate) dated 16.01.2025. A major change introduced is the concept of “Specified Premises”, which determines the GST rate applicable and the eligibility for Input Tax Credit (ITC).
This article explains the updated GST treatment in detail using examples, tables, and legal references for professionals and businesses.
🧾 Revised GST Rates on Restaurant Services (Applicable from 1st April 2025)
| Type of Restaurant | Specified Premises Status | GST Rate | ITC Eligibility | ECO Responsibility (u/s 9(5)) |
| Standalone Restaurant | Not Applicable | 5% | ❌ Not Available | ✅ Deemed Supplier |
| Hotel Restaurant | Not Specified Premises | 5% | ❌ Not Available | ✅ Deemed Supplier |
| Hotel Restaurant | Specified Premises | 18% | ✅ ITC Allowed | ❌ ECO Not Deemed Supplier, but collects TCS |
📘 What is a “Specified Premises” Under GST?
A restaurant in a hotel is deemed to be located in “Specified Premises” if:
- The value of accommodation (room tariff) exceeds ₹7,500 per unit/day in any preceding Financial Year, or
- The hotel voluntarily opts to be treated as a Specified Premises by filing Annexure VII.
| Hotel Type | Declared or Automatic | GST Rate on Food | ITC Eligibility |
| Luxury Hotel (e.g., Taj, Oberoi) | Automatically Specified | 18% | ✅ Yes |
| Budget Hotel (e.g., ₹6,000 tariff, no Annexure VII) | Not Specified | 5% | ❌ No |
| Small Hotel (Opted via Annexure VII) | Declared Specified | 18% | ✅ Yes |
Note: Once opted in, the “Specified Premises” classification continues for the full financial year.
🧠 Practical Scenarios & Tax Implications
✨ Examples
1: Luxury Hotel – Room Above ₹7,500
- Restaurant located inside Taj Hotel.
- Always treated as Specified Premises.
- GST = 18%, ITC = ✅ Available.
- MakeMyTrip collects TCS, not treated as supplier.
2: Restaurant via Swiggy from Standalone Outlet
- Restaurant not in hotel.
- GST = 5%, ITC = ❌ Not Available.
- Swiggy = Deemed Supplier under Section 9(5).
3: Small Hotel Filed Annexure VII
- Room tariff = ₹5,800.
- Hotel opts-in to be “Specified Premises.”
- GST = 18%, ITC = ✅ Available.
🧩 Role of ECOs (Zomato, Swiggy, OYO, MakeMyTrip)
| Supply Type | Premises | ECO Role | GST Rate | ITC |
| Food via Swiggy from Standalone | Not Hotel | ✅ Deemed Supplier | 5% | ❌ No |
| Food at Hyatt via MakeMyTrip | Specified Premises | ❌ Not Deemed Supplier | 18% | ✅ Yes (TCS by ECO) |
| Food via OYO in budget hotel | Not Specified | ✅ Deemed Supplier | 5% | ❌ No |
Note: In “Specified Premises,” ECO is not liable to pay GST but must collect TCS under Section 52.
📂 How to Declare via Annexure VII
Hotels not automatically covered (i.e., room rates < ₹7,500) can opt-in by filing Annexure VII with the GST department:
- Submit declaration before the financial year begins.
- Once opted, the status applies for the full financial year.
- Allows the restaurant to charge 18% GST with ITC.
🔁 Reverse Charge on Rent – Applicable to Restaurants
If a restaurant (registered under GST) takes commercial premises on rent from an unregistered person, the Reverse Charge Mechanism (RCM) applies under Section 9(3) of the CGST Act read with Notification No. 13/2017 – Central Tax (Rate).
| Situation | Supplier | Recipient | GST Applicability | Tax Payment |
| Restaurant renting from registered landlord | Registered | Registered | ✅ Forward Charge | Landlord pays GST |
| Restaurant renting from unregistered landlord | Unregistered | Registered | ✅ Reverse Charge | Restaurant pays GST under RCM |
Example:
ABC Restaurant takes a building on rent from an individual (not registered under GST). Monthly rent is ₹80,000.
- Since the landlord is unregistered, and restaurant is registered,
- ABC Restaurant must pay 18% GST under RCM.
- ITC is available on such RCM paid GST.
ITC on Reverse Charge – When Allowed?
| GST Rate on Restaurant Services | ITC on Reverse Charge Rent GST |
| 5% (Without ITC – as per Notification) | ❌ Not Allowed |
| 18% (With ITC – Specified Premises) | ✅ Allowed |
📌 Explanation: If a restaurant is charging 5% GST under the composition-like scheme (without ITC), then ITC on reverse charge rent is not eligible. However, if the restaurant is in a Specified Premises and charging 18% GST with ITC, the GST paid under RCM on rent becomes eligible for ITC.
Conclusion:
Hotels and restaurants must determine their “Specified Premises” status annually. This decision affects GST rate, ITC eligibility, and e-commerce aggregator treatment. Ensure timely classification and compliance to avoid disputes.
