Background:
Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 prescribes the rates of central tax on services (last amended vide Notification No. 15/2025-Central Tax (Rate) dated 17.09.2025 giving effect to the 56th GST Council’s rate rationalisation). The 57th GST Council recommended four distinct changes affecting this notification, each of which is explained below.
[A] Input tax credit in the same line of business (para C2(4) of the Press Release): Hotel accommodation having value of supply up to ₹7,500 per unit per day (item (i) of S. No. 7), restaurant service other than at specified premises (item (ii)), supply of food by Indian Railways/IRCTC or their licensees (item (iii)), outdoor catering at premises other than specified premises (item (iv)) and composite supply of outdoor catering with renting of premises (item (v)) are taxable at 2.5% CGST (5% GST) subject to the condition that credit of input tax charged on goods and services used in supplying the service has not been taken [Explanation (iv)]. The 5% without ITC rate for restaurants and outdoor catering has been mandatory since 01.10.2019, and for hotel accommodation up to ₹7,500 it became mandatory from 22.09.2025. Where the same service is procured and re-supplied by another supplier in the same line of business, for example, a hotel aggregator or travel company booking rooms from a hotel and re-selling them, a restaurant sourcing food from another restaurant or a cloud kitchen, or an event manager sub-contracting the catering to another caterer, the 5% tax charged at the earlier stage became a cost and the total tax burden cascaded to 10% or more. A similar problem had been solved long ago for passenger transport, renting of motor vehicles and tour operator services by allowing “input tax credit of input service in the same line of business”. The Council recommended extending the same relief to restaurant/outdoor catering services, hotel accommodation up to ₹7,500 per unit per day and gym/fitness services. The FAQs (Q. 28 to Q. 30 on services) clarify that only the limited credit of the same category of input service is to be allowed, and not full ITC.
[B] Passenger transport and renting of electric vehicles (para C2(1) of the Press Release): Item (vi) of S. No. 8 (transport of passengers by any motor vehicle) and items (i) and (ia) of S. No. 10 (renting of motor vehicle designed to carry passengers and renting of goods carriage) give an option of 5% with limited ITC (or 18% with full ITC) only “where the cost of fuel is included in the consideration charged from the service recipient”. Electricity used for charging an electric vehicle is not regarded as “fuel”, and hence EV-based cab operators, e-bus operators and EV rental companies were denied the 5% option, resulting in differential treatment of the same service depending on whether the vehicle runs on conventional fuel or electricity (FAQs Q. 8 and Q. 9 on services). The Council recommended providing the option of 5% with restricted ITC for passenger transport and rental of motor vehicles with operator using an electric vehicle where the cost of battery charging is included in the consideration.
[C] Delivery services through e-commerce operators (para C2(2) of the Press Release): With effect from 22.09.2025, Notification No. 15/2025-Central Tax (Rate) had substituted S. No. 12 (Heading 9968) to tax postal services, courier services, “local delivery services” (whether supplied through an ECO by a person not liable for registration, or otherwise) and other delivery services uniformly at 9% CGST (18%), and Notification No. 17/2025-Central Tax (Rate) had brought local delivery through ECOs under Section 9(5). The 18% rate on gig-worker based delivery through platforms was represented to be high and cascading, since the delivery partners are mostly unregistered and the ECO could not pass on credit. The Council recommended (i) bringing delivery services (other than courier and postal) supplied through an ECO under Section 9(5) where the supplier is not liable for registration, with a rate of 5% without ITC, and (ii) prescribing 5% without ITC for delivery services in relation to goods which are supplied or ordered through an ECO (FAQs Q. 15 and Q. 16 on services).
[D] Rationalisation of obsolete provisions: Paragraph 3 of the notification deemed the value of supply of lottery to be 100/112 of the face value (lottery run by State Governments) or 100/128 (lottery authorised by State Governments). Since 01.03.2020, lottery attracts a single rate of 28% and the value is determined under Rule 31A(2) of the CGST Rules as 100/128 of the face value or the notified price, whichever is higher; paragraph 3 had thus become redundant and potentially conflicting. Further, the definition of “goods transport agency” in clause (xxxx) of the Explanation, as substituted from 22.09.2025, excluded ECOs providing or facilitating “local delivery”, an expression which no longer appears in the rate entry after the present amendment.
What the Notification provides:
Now, the CBIC vide Notification No. 06/2026-Central Tax (Rate) dated 27.10.2026 (G.S.R. 936(E)), issued under Sections 9(1), 9(3), 9(4), 11(1), 15(5), 16(1) and 148 of the CGST Act, 2017 on the recommendations of the GST Council, has made the following amendments in Notification No. 11/2017-Central Tax (Rate):
[A] Same line of business ITC for hospitality services – S. No. 7 (Heading 9963): The condition in column (5) against items (i) to (v) has been substituted:
- Item (i) – Hotel accommodation up to ₹7,500 per unit per day (2.5%): “Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. hotel accommodation service procured from another supplier of hotel accommodation service), has not been taken [Please refer to Explanation No. (iv)]. Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.” Illustration given in the Notification: ‘A’ books a hotel accommodation from ‘B’ for ₹7,000 per unit per day; ‘B’ procures the accommodation from another supplier ‘C’ for ₹10,000 per unit per day, on which ‘C’ charges central tax at 9% (₹900). ‘B’ charges ‘A’ central tax at 2.5%. ‘B’ is entitled to ITC on the input service only to the extent of ₹250 (2.5% of ₹10,000) and not ₹900.
- Item (ii) – Restaurant service other than at specified premises (2.5%): “Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of restaurant service other than at specified premises), has not been taken [Please refer to Explanation No. (iv)]”. As restaurant service other than at specified premises is mandatorily taxable at 2.5%, no cap has been provided.
- Item (iii) – Supply of food by Indian Railways/IRCTC or their licensees in trains or at platforms (2.5%): “Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of inputs and input services in the same line of business (i.e. supply of goods, being food or any other article for human consumption or any drink, whether in trains or at platforms, procured from Indian Railways or IRCTC or their licensees), has not been taken [Please refer to Explanation No. (iv)]”. Notably, in this item the credit extends to both inputs and input services procured from Indian Railways/IRCTC/licensees.
- Item (iv) – Outdoor catering at premises other than specified premises (2.5%): credit of input service in the same line of business (i.e., outdoor catering service procured from another supplier of outdoor catering service) allowed, capped at 2.5% where the sub-supplier charges a higher rate.
- Item (v) – Composite supply of outdoor catering with renting of premises at premises other than specified premises (2.5%): credit of outdoor catering service procured from another supplier of outdoor catering service allowed, capped at 2.5%. Illustration given in the Notification: ‘A’ engages ‘B’ for a composite supply of outdoor catering with renting of premises for a wedding for ₹1,00,000; ‘B’ engages another caterer ‘C’ for ₹60,000, who charges central tax at 9% (₹5,400). ‘B’ charges ‘A’ central tax at 2.5% (₹2,500). ‘B’ can take ITC only to the extent of ₹1,500 (2.5% of ₹60,000) and not ₹5,400.
It may be noted that the Notification does not amend item (i) of S. No. 35 (beauty and physical well-being services falling under Group 99972, which covers gym and fitness services, taxable at 2.5% without ITC). The Council’s recommendation to allow same-line-of-business credit for gym/fitness services has therefore not been given effect through this Notification and would require a separate amendment.
[B] Electrically operated vehicles – S. No. 8 and S. No. 10: The following items have been inserted, each with an option of 2.5% (with ITC of input service in the same line of business, capped at 2.5%) or 9% without any condition:
| S. No. / item | Description of service | Rate of central tax | Condition |
| 8(vib) (Heading 9964), after item (via) | Transport of passengers by any electrically operated vehicle designed to carry passengers where the cost of battery charging is included in the consideration charged from the service recipient. | 2.5% or 9% | At 2.5%: ITC of goods and services used, other than ITC of input service in the same line of business (service of transportation of passengers in an electrically operated vehicle or service of renting of an electrically operated vehicle, procured from another service provider), has not been taken; credit of such input service capped at 2.5%. At 9%: no condition. |
| 10(ib) (Heading 9966), after item (ia) | Renting of any electrically operated vehicle designed to carry passengers where the cost of battery charging is included in the consideration charged from the service recipient. | 2.5% or 9% | Same as above. |
| 10(ic) (Heading 9966) | Renting of any electrically operated vehicle for transportation of goods where the cost of battery charging is included in the consideration charged from the service recipient. | 2.5% or 9% | At 2.5%: ITC other than ITC of input service in the same line of business (transportation of goods by an electrically operated vehicle or renting of an electrically operated vehicle, procured from another service provider) has not been taken; capped at 2.5%. At 9%: no condition. |
Illustration given in the Notification: ‘A’ engages ‘B’ for transportation of passengers from New Delhi to Gaya in an electrically operated vehicle for ₹1,000; ‘B’ hires an electrically operated vehicle with operator from ‘C’ for ₹800, on which ‘C’ charges central tax at 9% (₹72). If ‘B’ charges ‘A’ central tax at 2.5%, ‘B’ is entitled to ITC on the input service only to the extent of ₹20 (2.5% of ₹800) and not ₹72. A new clause (xxxxv) has been inserted in paragraph 4 (Explanation) to define “electrically operated vehicle” as a road vehicle which runs solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such vehicle, and shall include E-bicycles.
[C] Delivery services – S. No. 12 (Heading 9968): Item (iii) and the entries relating thereto have been substituted as under:
| Item | Description of service | Rate of central tax | Condition |
| (iii) | Delivery services, other than (i) and (ii) above, (a) supplied through electronic commerce operator where the person supplying such services is not liable for registration under sub-section (1) of section 22 of the CGST Act, 2017; (b) in relation to goods, where such goods are supplied through an electronic commerce operator. | 2.5% | Provided that credit of input tax charged on goods and services used in supplying delivery service has not been taken [Please refer to Explanation No. (iv)]. |
Thus, (a) delivery services supplied through an ECO by unregistered delivery partners (on which the ECO is liable under Section 9(5) read with Notification No. 09/2026-Central Tax (Rate), analysed in Update 8), and (b) delivery services in relation to goods supplied through an ECO (whether supplied by the ECO’s own fleet, by a registered logistics partner or otherwise), now attract 5% without ITC, as against 18% hitherto. Postal services (item (i)) and courier services (item (ii)) continue at 18%, and item (iv), “Delivery services other than (i), (ii) and (iii) above”, continues at 18% as a residual entry.
[D] Other amendments: (i) Paragraph 3 of the Notification (deemed value of lottery) has been omitted; and (ii) clause (xxxx) of paragraph 4 (Explanation) has been substituted so that “goods transport agency” simply “means any person who provides service in relation to transport of goods by road and issues a consignment note by whatever name called”, removing the exclusion relating to ECOs providing or facilitating local delivery which was inserted from 22.09.2025.
Identical amendments have been made in Notification No. 8/2017-Integrated Tax (Rate) vide Notification No. 06/2026-Integrated Tax (Rate) dated 27.10.2026 (G.S.R. 937(E)) (with the rates of 5% and 18% and the IGST illustrations) and in Notification No. 11/2017-Union Territory Tax (Rate) vide Notification No. 06/2026-Union Territory Tax (Rate) dated 27.10.2026 (G.S.R. 938(E)).
Effective date:
The Notification comes into force with effect from 1st November, 2026. The same-line-of-business credit will be available in respect of input services whose time of supply (and the recipient’s invoice) falls on or after 01.11.2026; credit on such services received prior to that date, which was not available under the then condition, cannot be claimed retrospectively. The reduced 5% rate on delivery services and the 5% option for EV services apply to supplies with time of supply on or after 01.11.2026, with Section 14 of the CGST Act governing transitional cases.
Key takeaways for taxpayers and the industry:
- Hotels, online travel agencies and aggregators: Suppliers of hotel accommodation up to ₹7,500 who procure rooms from other hotels (including aggregators re-selling inventory at 5%) can now take credit of the tax charged by the hotel, restricted to 2.5% CGST + 2.5% SGST (or 5% IGST) of the value of the input service. Where the supplying hotel charges 18% (value above ₹7,500), the excess credit is not available and must be expensed. Credit on all other inputs and input services (rent, housekeeping, commission, software, etc.) continues to be blocked under Explanation (iv), and common credit must be reversed under Rule 42/43.
- Restaurants, cloud kitchens and caterers: Restaurant service procured from another restaurant (e.g., a franchise or outsourced kitchen arrangement, or a restaurant chain’s central kitchen supplying restaurant service to its outlets across GSTINs) is now creditable at 5%; purchase of food, raw materials, packaging and other inputs remains non-creditable. Caterers sub-contracting events to other caterers gain the same relief, capped at 5% of the sub-contract value.
- Gym and fitness centres: No relief is available as yet, as S. No. 35(i) has not been amended; the industry may take up the matter with the CBIC for a consequential notification.
- EV fleet operators, e-cab aggregators and EV rental companies: An option of 5% (with same-line credit) or 18% (with full ITC) is now available for passenger transport and renting of EVs with operator, provided the cost of battery charging is included in the consideration. Operators who hire EVs from sub-operators can take credit of the sub-operator’s tax up to 5%. The option should be exercised consistently and reflected in contracts and invoices. Leasing or renting of EVs without operator (as goods) continues to be taxed at the rate applicable to the vehicle (FAQ Q. 10). For passenger transport through ECOs (e-cab platforms), the ECO’s liability under Section 9(5) will now be discharged at 5% on EV rides on the same footing as conventional vehicles.
- E-commerce operators and logistics partners: Delivery of goods ordered through ECOs (food delivery, quick commerce, e-commerce marketplaces) moves from 18% to 5% without ITC. ECOs liable under Section 9(5) for unregistered delivery partners should pay 5% in cash; registered delivery service providers delivering ECO-supplied goods will charge 5% without ITC and must reverse the ITC on their inputs (vehicles, fuel, etc.) attributable to such services. Courier companies and postal services remain at 18% with ITC, and delivery services not relating to ECO-supplied goods and not supplied through an ECO remain at 18% under item (iv).
- Lottery: The omission of paragraph 3 has no revenue effect, as valuation continues under Rule 31A(2) of the CGST Rules at 100/128 of the face value or the notified price, whichever is higher.
Similar notifications have been passed under the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/N.-No.-06-2026-CT-UT-IG-Rate.pdf
