NOVEMBER 20, 2017

By G Natarajan, Advocate, Swamy Associates

THE rate of GST payable by different types of Hotels / Restaurants, has undergone a lot of changes vide Notification 46/2017 Central Taxes (Rate) Dt. 14.11.2017, with effect from 15.11.2017 and an attempt is made in this article to explain the changes.

As per S.No. 7 of Notification 11/2017 Central Taxes (Rate) Dt. 28.06.2017, with effect from 01.07.2017, the various Hotel related transactions are subjected to different rates of GST under nine (9) categories, which are tabulated below in simple language. The total rate of GST including the corresponding SGST rates is mentioned in the table.

It may be observed from the above that the GST rate for food related services was based on whether the restaurant is having the facility of air-conditioning / central heating / licence to service alcoholic liquor, or not. If any of these facilities are not available, the rate would be 12 % and if any one of these facilities are available, the rate of GST would be 18 %.

The above entry S.No. 7 has been amended vide Notification 46/2017 Central Taxes (Rate) Dated 14.11.2017 with effect from 15.11.2017. It may be observed that the relevance of availability of the facilities of air conditioning / central heating / licence to service alcoholic liquor, to determine the GST rate has been completed dispensed with . But, the rate of GST would depend upon the declared tariff of the room in the place. But there are lot of Restaurants without any lodging facility and what GST rate would apply for such restaurants? We will come back to this question little later.

To tabulate the changes -

* Seems the intention is to mention below, but the notification reads as "above" which seems to be an error.

Coming back to the above question, as to what would be the rate applicable for stand-alone restaurants, which do not have any lodging facility, the explanation under S.No. 7 (iii) provides an answer, which is reproduced below.

Explanation.- For the removal of doubt, it is hereby clarified that, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or drink, where such supply or service is for cash, deferred payment or other valuable consideration, 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, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent shall attract central tax @ 2.5% without any input tax credit under item (i) above and shall not be levied at the rate as specified under this entry.

So stand-alone restaurants would attract 5 % GST, if they do not avail any ITC. They have to pay 18 % if they avail ITC, as per S.No. 7 (ix).

Now, the next question is if a restaurant situated in a lodging facility where rooms of different categories are available, where the declared tariff of some of the rooms are below Rs.7,500 per day and some of them are above Rs.7,500 what rate of GST would apply?

A careful reading of the entries reveal that if the declared tariff of "any unit" is above Rs.7,500, then the rate would be 18 %.

It may also be noted that the above rates would apply for take away food also, as consumption of both " in*" or "away" from the Hotel is covered.

* Instead of the word "in", the word "on" is used.

Certain nagging questions -

Next question is - what would the GST rate, if food is ordered through room services, by a person who is staying in a Hotel. Whether the supply of food in that case has to be treated as a composite supply, along with accommodation and since the principal supply being accommodation, the rate applicable for accommodation (depending upon the declared tariff) would apply or the GST rates separately prescribed for food supply would apply?

What if he, instead of ordering through room service, goes to the restaurant and takes his food, what would be the rate?

It may be noted that under S.No. 7 (v) outdoor catering would attract 18% and this has not undergone any change. The term "outdoor catering" has not at all been defined in GST law. If so, in what circumstances 18 % rate under S.No. 7 (v) would apply? What is the status of factory canteens run by contractors? What about Home delivery of food?

(The views expressed are strictly personal.)