Do you love to eat out often? Remember that the latest rates of Goods and Services Tax (GST) took effect on April 1. As per the new rates, customers may have to pay either 5 per cent or 18 per cent based on where the restaurant is located and whether it is part of ‘specified’ premises or not. Here are the details.
Restaurant bill: Three GST rate options
1. When it is a standalone restaurant, a GST rate of 5 per cent will be applicable. There will be no input tax credit (ITC) available.
2. When it is located on hotel premises.
A. Qualified as specified premises: When it is qualified as specified premises, the GST rate of 18 per cent will be applicable.
B. Not qualified as specified premises: When it is not qualified as specified premises, the GST rate of 5 per cent will be applicable.
What are specified premises?
When the value of supply of any unit of accommodation is ₹7,500 per unit per day” than=”” rs=”” 7,500=”” per=”” unit=”” day”=””>more than ₹7,500 per unit per day or equivalent in the preceding financial year, it becomes a specified premises in the subsequent financial year.
For example, large hotels such as Taj, Lalit, and Hyatt will always be specified premises and therefore, the GST rate will always be 18 per cent with ITC.
Other hotel accommodations have the option to be specified premises after filing a declaration in annexure VII (GST will be 18 per cent with ITC) or not (GST rate will be 5 per cent).
“As per the latest GST rule, hotels can opt for classification of ‘specified premises’ if the room tariff in the previous year does not exceed ₹7,500. Eighteen per cent GST with the option of availing ITC is applicable on restaurants operating from specified premises,” says CA Pratibha Goyal, partner of PD Gupta & Company, a Delhi-based chartered accountancy firm.
The Central Board of Indirect Taxes and Customs released a set of Frequently Asked Questions (FAQs) on ‘restaurant service’ supplied at ‘specified premises’. A few common questions and answers are given below.
Who can file a declaration?
A registered person supplying hotel accommodation services can file a declaration, terming the premises from which the hotel accommodation services are supplied as ‘specified premises’ for a financial year. This declaration should be filed in the requisite format.
This declaration will have to be filed between January 1 and March 31 of the financial year preceding the financial year for which the registered person intends to declare the premises as ‘specified premises’.
Does the rate apply to catering services?
Yes, the revised definition of ‘specified premises’ will determine the rate applicable to catering services.
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