A hotel charging ₹7500, during a year for accommodation (inclusive of food) will be required to levy 18 per cent GST for the restaurant services provided to walk-in guests, West Bengal Authority for Advance Ruling (WBAAR) has said. Experts say this interpretation is critical because many hotels follow dynamic pricing models, particularly during festive seasons or peak demand.
As on date, if room tariff is less than ₹7500 in a hotel, then it will be required to collect GST at 5 per cent for walk-in guest coming to restaurants located inside the premise. However, the GST for walk-guest using restaurants will be 18 per cent (with Input Tax Credit), in case tariff is more than ₹7500. However, the critical question is will ₹7500 amount include just room rent or room rent with food plan (very popular among corporate traveller).
Replying to the question, WBAAR said, ”If in any Financial Year, the hotel charges a rate of above ₹7,500 for any unit of accommodation (inclusive of the food charges in the applicable plan, even if indicated separately in the invoices), the premises shall qualify to be considered as “specified premises” for the next Financial Year and appropriate rate of GST at 9 per cent CGST + 9 per cent SGST shall apply for the restaurant services provided to walk-in guests.
The applicant, Orsino Spa Resort located in Darjeeling offers various meal plan options along with the accommodation service as per the industry practices like AP, CP, EP. In the American Plan (AP) all the 3 meals i.e. breakfast +lunch +dinner is included. In the Continental Plan (CP), breakfast is included and in the European Plan (EP), it is the most basic plan providing only accommodation service. Therefore, such supplies provided under AP, CP plan constitutes a composite supply under GST. In addition, the hotel also provided separate restaurant services to the walk- in- guests.
After going though all the facts presented and arguments made, WBAAR observed that under the AP or CP, the food component will have no separate treatment for the purpose of taxation, since it is clearly a case of “composite supply”. “If the total value of the combined supply (accommodation and food) exceeds ₹7500 and the tax rate will be 9 per cent CGST + 9 per cent SGST.,” it said.
‘Specified premises’
According to an tax expert, while the law on ‘specified premises’ and the ₹7,500 threshold has been settled, the uniqueness of this ruling lies in its forward-looking application—the AAR has categorically held that even one instance of charging above ₹7,500 in a financial year would trigger reclassification of the hotel as a ‘specified premise’ for the entire next financial year.
This interpretation is critical because many hotels follow dynamic pricing models, particularly during festive seasons or peak demand. A short-term rate surge, even if applied to a limited number of rooms, may alter GST treatment for the entire business in the following year. “The ruling also clarifies that separate invoicing of room charges and meals does not shield the hotel from this aggregate test, closing any room for interpretational flexibility,” he said.
