Note on recent amendments related to Restaurants Services at Specified Premises

[Kashish Gupta]

Existing Law

1. Since the implementation of the Goods and Services Tax^[1] regime, the levy of tax on restaurant services has undergone significant amendments. Composite Supply of goods, being food or any other article for human consumption or any drink, by way of or as a part of any service or in any other manner whatsoever, has been treated as “supply of services” in terms of entry 6(b) of Schedule II to the CGST Act, 2017.
2. The rate of GST applicable on “supply of ‘restaurant service’ other than at ‘specified premises’” has been notified at the rate of 5%^[2] subject to the condition that credit of input tax charged on goods and services used in supplying the service has not been taken. The supply of restaurant services at specified premises is subject to GST at the rate of 18% with full benefit of ITC.
3. The expressions “restaurant service” and “specified premises" are defined in paragraph 4 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended) as under:

“(xxxii) ‘Restaurant service’ means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

(xxxvi) ‘Specified premises’ means premises providing ‘hotel accommodation’ services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent.”

4. In terms of the definition of “restaurant service” and “specified premises”, services provided by restaurants, eating joints including mess, canteens; and the one’s located in hotels having declared tariff of any unit of accommodation upto Rs. 7,500 per unit per day or equivalent is subject to GST rate of 5% subject to the conditions mentioned above.
5. It may further be noted that with effect from 01.01.2022, supply of ‘restaurant service’ other than at ‘specified premises’ was notified^[3] under Section 9(5) of the Central Goods and Services Tax Act, 2017 ^[4]. Therefore, if the services specified at para 4 above are supplied through an E-Commerce Operators^[5], then GST at the rate of 5% is required to be paid to the government treasury by the respective ECO. In other words, ECO is deemed to be a supplier and person liable to pay GST on supply of restaurant services notified by the Government.

Recent Amendments

6. Central Government has now issued Notification No. 05/2025-Central Tax (Rate) dated 16.01.2025 amending the Notification No. 11/2017 (supra) and Notification No. 08/2025-Central Tax (Rate) dated 16.01.2025 amending the Notification No. 11/2017 (supra), both effective from 01.04.2025, amending the definition of “Specified Premises”.
7. The substituted definition of “specified premises”, effective from 01.04.2015, reads as under:

“(xxxvi) “Specified premises”, for a financial year, means,-

(a) a premises from where the supplier has provided in the preceding financial year, ‘hotel accommodation’ service having the value of supply of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent; or

(b) a premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration, on or after the 1st of January and not later than 31st of March of the preceding financial year, declaring the said premises to be a specified premises; or

(c) a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises;

8. As per the new definition of “specified premises”, operating from 01.04.2025, the following are the notable points:

• If the restaurant services are provided from the premises of the hotel, who during the preceding financial year (i.e., FY 2024-25) has rented out room for a value above Rs. 7,500 per unit per day or equivalent, then said premises are to be treated as specified premises for the financial year 2025-26. Similarly, for the FY 2026-27, hotel would be considered as “specified premises”, if the value is above Rs. 7,500/- per unit per day or equivalent during the FY 2025-26 and so on.

      Notable Points

The concept of declared tariff has been done away with. Upto 31.03.2025, taxability is triggered at the rate of 18% from the moment tariff above Rs. 7,500 is declared by a hotel. Whereas from the FY 2025-26 and onwards, taxability at the rate of 18% shall be determined for a financial year taking into account actual value of supply during preceding financial year.

• If the restaurant services are supplied from the premises of the hotel, who has filed a declaration in a Form appended as Annexure VII to the Notification No. 05/2025 (supra) during the period from 01.01.2025 to 31.03.2025, then said premises are to be considered as Specified Premises for the financial year 2025-26.
• If the restaurant services are supplied from the premises of the hotel, who within 15 days of obtaining acknowledgement for the registration application has filed a declaration in a Form appended as Annexure VIII to the Notification No. 05/2025 (supra), then said premises are considered as Specified Premises for said financial year (i.e., from the effective date of registration till the end of financial year).
• Going by the language of Opt-In Declaration appended as Annexure VII and VIII to the Notification No. 05/2025 (supra), it transpires that unless a hotel who voluntarily opted for their premises to be a specified premises, by way of filing above mentioned declarations, they would continue to be specified premises for the subsequent financial years. It further appears from Note No. 2 of said declaration that declarations are to be filed separately for each premise. If said hotels wishes to opt out as “specified premises”, then they have to file an Opt-Out Declaration in a form appended as an Annexure IX to the Notification No. 05/2025 (supra).

         Paksh Remarks

• The substituted definition of specified premises reads specifically for “a financial year”. Therefore, the continued applicability of Opt-in declaration to subsequent financial years, as per point no. 2 of the Opt-In Declaration Form, seems to be against the definition of specified premises.
• There is no provision that the declaration is to be filed for all premises. Therefore, the assessee is not required to file Opt-In for its all hotels. Instead, he has the option to choose specific premises for which the declaration is to be filed.

For example, If an assessee provides hotel accommodation services from 10 hotels, where rooms are rented for a value upto Rs. 7,500 per unit per day or equivalent, they can still opt to file an Opt-In declaration for four (4) or any other number of hotels out of the total ten (10) hotels.

• Similarly, there is no periodicity specified in the definition of “specified premises” within which the opt-out declaration is to be filed.
• Therefore, it appears that Form appended as Annexure VII, VIII and IX to Notification No. 05/2025 (supra) are in violation to the definition of “Specified premises”.

9. An example to replicate the change brought due to the amendment is tabulated below:

S. No.	Situation	Test of considering as ‘Specified Premises’
Pre-Amendment
	A hotel charges Rs. 9000/- per night as declared tariff and discounts it to Rs. 7000/- during the sale.	Specified premises (As the declared tariff is above Rs. 7,500/-)
	A hotel with a declared tariff of Rs. 7,000/- whose actual value of supply is Rs. 8,000/-	Non-specified premises (As the declared tariff is not above Rs. 7,500/-)
Post-Amendment
	A hotel is supplying rooms for Rs. 7,600/- in the FY 2024-25 irrespective of whether declared tariff is above Rs. 7,500 or upto Rs. 7,500/-	Specified Premises (for FY 2025-26)
	A hotel supplying rooms at Rs. 4,000/- in FY 2024-25 but files a voluntary declaration during the period 01.01.2025 to 31.03.2025	Specified Premises (for FY 2025-26)

Conclusion

10. GST Council in its 23^rd meeting dated 10.11.2017 has taken the decision which is extracted as under:

“65.29 Keeping in view the discussion as above, the Council agreed to apply tax rate of 5% tax without input tax credit on all standalone restaurants and a rate of tax of 18% with input tax credit on a restaurant in a hotel having room of declared tariff of more than Rs. 7,500 per night.”

11. As per the law which stands amended now, it appears that a restaurant in a hotel “having room tariff from Rs. 1 to any amount” can opt for rate of tax of 18% with Input Tax Credit. Whereas, a stand-alone restaurant has to mandatorily opt for rate of 5% without Input Tax Credit.

12. To that extent there seems to be no intelligible differentia and hence, the amended position of law may be subject to judicial scrutiny.

^[1] GST

^[2] Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019

^[3] Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 amended by Notification No. 17/2021-Central Tax (Rate) dated 18.11.2021 (effective from 01.01.2022)

^[4] CGST Act

^[5] ECO