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FREQUENTLY ASKED QUESTIONs (FAQs) FOR HOTEL AND RESTAURANT

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FREQUENTLY ASKED QUESTIONs (FAQs) FOR HOTEL AND RESTAURANT
By: CASanjay Kumawat
September 26, 2017
  • Contents
  1. Will GST be charged on actual tariff or declared tariff for accommodation services?

Ans.   Declared or published tariff is relevant only for determination of the tax rate slab. GST will be payable on the actual amount charged (transaction value).

  1. What will be GST rate if cost goes up (more than declared tariff) owing to additional bed?

Ans.   GST rate would be determined according to declared tariff for the room, and GST at the rate so determined would be levied on the entire amount charged from the customer.

For example, if the declared tariff is ₹ 7000 per unit per day but the amount charged from the customer on account of extra bed is ₹ 8000, GST shall be charged at 18% on ₹ 8000.

  1. Where will the declared tariff be published?

Ans.   Tariff declared anywhere, say on the websites through which business is being procured or printed on tariff card or displayed at the reception will be the declared tariff. In case different tariff is declared at different places, highest of such declared tariffs shall be the declared tariff for the purpose of levy of GST.

  1. Same room may have different tariff at different times depending on season or flow of tourists as per dynamic pricing. Which rate to be used then?

Ans.   In case different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.

  1. If tariff changes between booking and actual usage, which rate will be used?

Ans.   Declared tariff at the time of supply would apply.

  1. GST at what rate would be levied if an upgrade is provided to the customer at a lower rate?

Ans.   If declared tariff of the accommodation provided by way of upgrade is ₹ 10,000, but amount charged is ₹ 7,000, then GST would be levied @ 28% on ₹ 7,000/-.

  1. Vide notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 entry 34, GST on the service of admission into casino under Heading 9996 (Recreational, cultural and sporting services) has been levied @ 28%.

Since the Value of supply rule has not specified the method of determining taxable amount in casino, Casino Operators have been informed to collect 28% GST on gross amount collected as admission charge or entry fee. The method of levy adopted needs to be clarified.

Ans.   Relevant part of entry 34 of the said CGST notification reads as under:

“Heading 9996 (Recreational, cultural and sporting services) - …

(iii) Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merrygo rounds, go-carting, casinos, race-course, ballet, any sporting event such as Indian Premier League and the like. - 14%

(iv)…

(v) Gambling. - 14 %”

As is evident from the notification, “entry to casinos” and “gambling” are two different services, and GST is leviable at 28% on both these services (14% CGST and 14% SGST) on the value determined as per section 15 of the CGST Act.

Thus, GST @ 28% would apply on entry to casinos as well as on betting/ gambling services being provided by casinos on the transaction value of betting, i.e. the total bet value, in addition to GST levy on any other services being provided by the casinos (such as services by way of supply of food/ drinks etc. at the casinos). Betting, in pre-GST regime, was subjected to betting tax on full bet value.

  1. The provision in rate schedule Notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 does not clearly state the tax base to levy GST on horse racing. This may be clarified.

Ans.   GST would be leviable on the entire bet value i.e. total of face value of any or all bets paid into the totalisator or placed with licensed book makers, as the case may be.

Illustration: If entire bet value is ₹ 100, GST leviable will be ₹ 28/-.

  1. Whether for the purpose of entries at Sl. Nos. 34(ii) [admission to cinema] and 7(ii)(vi)(viii) [Accommodation in hotels, inns, etc.], of Notification No. 11/2017-CT (Rate) dated 28th June 2017, price/ declared tariff includes the tax component or not?

Ans.   Price/ declared tariff does not include taxes.

  1. Whether rent on rooms provided to inpatients is exempted? If liable to tax, please mention the entry of CGST Notification 11/2017-CT(Rate)?

Ans.   Room rent in hospitals is exempt.

  1. What will be the rate of tax for bakery items supplied where eating place is attached - manufacturer for the purpose of composition levy?

Ans.   Any service by way of serving of food or drinks including by a bakery qualifies under section 10 (1) (b) of CGST Act and hence GST rate of composition levy for the same would be 5%.

  1. Whether home stays providing accommodation through an Electronic Commerce Operator (ECO), below threshold limit are exempt from taking registration?

Ans.   Notification No. 17/2017-Central Tax (Rate), has been issued making ECOs liable for payment of GST in case of accommodation services provided in hotels, inns guest houses or other commercial places meant for residential or lodging purposes provided by a person having turnover below ₹ 20 lakhs (Rs. 10 lakhs in special category states) per annum and thus not required to take registration under section 22(1) of CGST Act, 2017. Such persons, even though they provide services through ECO, are not required to take registration in view of section 24(ix) of CGST Act, 2017.

  1. What rates will be applicable for accommodation in various hotels/ guest houses/ inns etc. in India?

Ans.   The GST rates applicable for accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes will depend upon the tariff per unit per day declared by the respective accommodation establishment. The slabs of GST rates applicable are given in the table below:

S. No.

Declared Tariff (per unit per day)

GST rates applicable

1.

Less than ₹ 1000

Nil

2.

₹ 1000 and above but less than ₹ 2500

12 %

3.

₹ 2500 and above but less than ₹ 7500

18 %

4.

More than ₹ 7500

28 %

  1. How will the rates be affected if a Hotel/ Club etc. provides discount on the declared tariff(s)?

Ans.   The GST rates applicable on all accommodation establishments (hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes) depends on the declared tariff per unit per day by the respective establishment.

If a discount is provided, then the slab of GST rate applicable (as per table above) will remain the same, however, the rate would be charged on the actual tariff charged.

E.g. If a room costs ₹ 10,000/- per day and 40% discount is available on the same, then GST rate of 28% (for tariff of ₹ 7500/- and above) will be applicable on ₹ 6000/- i.e. on the actual tariff charged. Therefore, the actual billing amount will be ₹ 6000/- + (28% of 6000) = ₹ 7680/-.

  1. What rates will be applicable for restaurants?

Ans.   Supply of Food/ Drinks in Restaurants will be charged as per the rates given in the following table:

S.No.

Description

GST rates applicable

1.

Food/ Drinks in restaurant not having the facility of air conditioning or central heating at any time during the year and not having the license to serve liquor

12 %

2.

Food/drinks in restaurant having license to serve liquor

18 %

3.

Food/drinks in restaurant having facility of air-conditioning or central heating at any time during the year

18 %

4.

Food/drinks in air-conditioned restaurant in 5-star or above rated Hotel

18 %

5.

Food/drinks in outdoor catering

18%

6.

Food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises

18%

7.

All other services not specified elsewhere

18%

  1.  How is the present system different from GST?

Ans.   It is an indisputable truth that the introduction of GST will affect the F&B and the Restaurant and Hospitality industry in a considerable manner, and will bring about wide changes in the present system that prevails in the industry.

Under the present system, if the total restaurant bill is ₹ 100, then the service tax is charged at the rate of 15%, only on 40% of the total bill amount. This means the effective rate of service tax is 6%. Other than this, VAT is applicable on 60% of the bill amount.

After the GST comes into the picture, the entire amount shall be liable for GST. The GST rules require that there will be two different types of GST levied on each transaction – State GST and Central GST. The rates of these two taxes are finalized by the Central Government. But remember that both of these taxes will be applicable on the entire bill amount.

The new GST regime promises the following-

  • Elimination of Tax Cascading
  • Uniform law and single rate
  • Consistency and certainty in laws and their implementation
  • Simplified compliances
  1. What are the various taxes levied on the restaurants?

Ans.   The Goods and Services Tax is a one tax regime that would get rid of all the other Federal and State Taxes.  A four-tier tax structure has been finalized by the Central Government where taxes will be levied at 5, 12, 18, and 28%.

The GST Council has agreed on different tax slabs for restaurants depending on their turnover and whether they are AC or Non-AC. 
This means consumers would have to shell out more or less depending on whether they are visiting a restaurant with Air Conditioning or just a regular Non-AC food joint. The service tax rates at restaurants in 5-star, 7-star hotels will be much higher at 28 per cent.

Here is a lowdown on the new rates:

  • Restaurants with a turnover of less than ₹ 75 lakh will be levied a tax rate of 5 percent.
  • Non-AC restaurants will have a 12% tax rate.
  • AC restaurants will have to shell out 18% tax.
  • Also, five-star restaurants will be charged a luxury tax of 18 percent.
  • Hotels, lodges with tariffs less than ₹ 1,000 will be taxed at 0%.
  • Hotel lodges with tariffs between ₹ 1,000- ₹ 2,500 will be charged 12% tax
  • Hotel lodges with tariffs between ₹ 2,500- ₹ 7,500 will be charged 18% tax.
  • Hotel lodges with tariffs more than ₹ 7,500 will be charged 28% tax.
  1.  What is Input Tax Credit?

Ans.   For taxes to be paid at the previous stage of the supply chain, Input Tax Credit is granted. This is done to ensure that the tax is levied only on the amount of value addition at each stage of the supply chain.

For instance, a restaurant owner would get credits for the taxes paid on the raw materials purchased while computing the final indirect tax liability on the items that are collected from the consumers.

If your restaurant business has annual sales above ₹ 20 lakh, then you are liable to pay the GST.

  1. How would my restaurant benefit from the GST?

Ans. Though majorly overlooked, there are certain benefits of the GST as well, and it impacts the restaurant industry in a positive way as well.

  • Consumers are finally free from having to haggle their brains calculating various taxes on the final bill. For customers, the GST has made dining out more pocket-friendly with a single transparent 18% charge as opposed to the earlier multiple 20-24% charges that were cumulatively levied.
  • The payment system is going to be more effective and faster.
  • Overall, trading on several commodities that was not regulated earlier has become more structured, for example, oilseeds, pulses, and cereals have been put under the light of a structured tax, and therefore can be accessed better in terms of both manufacture and consumption.
  • There would be more transparency in business, as everything, from the purchase to the sale of the product or service would be documented.
  1.  How would GST affect you as a restaurant owner?

Ans.   Restaurant owners have more reason to cheer in the GST regime. Under the earlier tax regime, restaurant business owners did not get any option to adjust the output service tax liability with the credit of input VAT on goods consumed. However, under the new regime both these taxes will get subsumed into GST and thus irrespective of goods and services, the credit of input will be available for adjustment against the output liability. This will further optimize the working capital of these restaurants and in turn, consumers can expect a more superior quality of food and services.

Raw materials can be procured at subsidized rates from agriculturalists and farmers at a single stroke instead of owners having to negotiate taxes shall remain uniform throughout states thus making the competition even. The overall cost of procuring goods will thus decrease substantially, making the restaurant business a viable and easily manageable venture again.

  1. How would GST impact the restaurants selling alcoholic beverages?

Ans.   Alcohol comes under the Excise and State Tax, and does not come under the GST. However, the alcoholic beverage and aerated drinks sector are expected to see better and more effective channels of distribution. States shall have administrative regulatory powers over the sale of liquor as the product will no longer be controlled by the Centre. However, in addition to this alcohol, on the whole, could take a hit as the tax on the final retail product will be high due to stringent control- this owing to a fall in demand in the consumer market, as well as an adverse impact on foreign investment in the hospitality sector. 

Although foreign entrants may be slightly skeptical in investing in restaurants and hotels because of the increase in liquor costs, and overall this may have a damaging impact on the sales price, therefore placing the customer at a crossroads upon purchase of alcohol.          

  1. A registered person is sending semi-cooked food from his manufacturing unit at Gurugram to his branch in Delhi. Is he required to pay any tax?

Ans.   In accordance with the provisions of section 25(4) of the CGST Act, 2017, branches in different States are considered as distinct persons. Further, as per Schedule I, this constitutes supply made in the course or furtherance of business between distinct persons even if made without consideration. As it is an inter-State supply, the registered person is required to pay IGST.

  1. A registered person is supplying manufactured food products to another person. Transportation charges are required to be paid by the supplier but are actually paid by the recipient. Whether this transportation charges would be added in the supply value?

Ans.   If the supplier is liable to pay any amount in relation to a supply, such amount would be a part of transaction value, even if the same has been paid by the recipient. In this case, the transportation charges shall be added to the value of supply.

  1. What will be the rate of tax on cold drinks (non- alcoholic beverages) and ice cream when served in non-AC Restaurant along with food?

Ans.   The rate of tax shall be 12 %. In the event of the supply being made in an AC restaurant, the rate of tax shall be 18%. If the restaurant was availing composition scheme (can do so only if ice cream is not manufactured by the restaurant), the rate of tax shall be 5% of the aggregate turnover.

  1. The supplier has sold machinery for hotel industry on 28-06-2017. The purchaser has received the invoice and machinery on 05-07-2017. Whether ITC of Duty / VAT paid (under the existing law) on machinery can be allowed to be claimed?

Ans.   No. Such credit is not admissible in case of machinery, being capital goods. As per Section 140 (5) of the CGST Act, 2017, credit of eligible duties and taxes in respect of only inputs / input services in transit during transition from Pre-GST to Post-GST is allowable. This is subject to the condition that the tax on such supply is paid under the existing law and the recipient records this receipt in his books of accounts within thirty days of the appointed day.

  1. Is Atta / Maida/ Besan supplied in bulk liable to tax under GST?

Ans.   Outward supply of these goods if affected without registered brand name is exempt under GST. However, if the outward supply is made under a registered brand name and put up in unit container then it would be liable to tax @ 5%.

Case Study: Caterpillar is a restaurant cum bar in Kolkata. It has successfully migrated to GST. While the first floor area of the restaurant is air conditioned and supplies food as well as liquor, the ground floor serves only food and is non-air-conditioned. Cater pillar wants to know,–

  1. Whether they will charge GST @ 12% on supplies made from ground floor or 18%?

Ans.   Tax will have to be charged @ 18% irrespective of from where the supply is made, first floor or second floor. If any part of the establishment has a facility of air conditioning then the rate will be 18% for all supplies from the restaurant.

  1. Whether they can raise one tax invoice for both food and liquor or not?

Ans.   Tax invoice has to be issued for supply of food, while for liquor a bill of supply has to be issued or any invoice as may be required under the provisions of local VAT or sales tax law of the concerned State.

  1. What will the rate of tax to be charged for supplies of food made from their takeaway counter?

Ans.   Tax has to be charged @18% on supplies of food made from their takeaway counter.

  1. Can they claim ITC of CGST and SGST paid on crockery items to be used in the restaurant?

Ans.   Yes, they can claim ITC of CGST and SGST paid on crockery items to be used in the restaurant. It may be stated that they are entitled to the credit of even IGST paid where such goods are procured from outside the State against a tax invoice.

  1. Whether they will be eligible for ITC on crockery items purchased locally in the month of March, 2017 paying VAT of ₹ 72,500/-. The goods have been shown as business assets.

Ans.   If the State VAT law allowed ITC on such goods, the credit was available on the date of purchase. Section 140(1) of the SGST Act, 2017 allows them to carry forward the credit on account of VAT.

  1. Whether they can opt for composition (last year their turnover was more than rupees one Crore)?

Ans.   No. they are not eligible for composition levy as they are also supplying liquor.

  1. Can they issue separate series of tax invoices for their supplies from first floor, ground floor and takeaway counter?

Ans.   In accordance with the provisions of Rule 46(b) of the CGST Rules, 2017 the tax invoice need to be serially numbered not exceeding sixteen characters, in one or multiple series. As such, they can issue different series of tax invoices as stated but it must conform to the requirements as given in the said rule.

  1. Is there any provision for tax to be paid under reverse charge incase where electronic commerce operator is involved?

Ans.   Yes, there are provisions and the same are contained in all the laws for GST (be it Central GST, Integrated GST and UT GST). Under these laws power has been given to the Government to notify the category of services on which the tax is to be paid under reverse charge. Accordingly, Government has notified the electronic commerce operators to whom GST is to be paid.

  1. What are the services under which tax is payable under reverse charge incase any electronic commerce operator is involved?

Ans.   There are broadly two types of services notified by Government where the tax is to be paid under reverse charge by the electronic commerce operator, these services are:

  • Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle. (This relates to Online cab aggregators like Ola or Uber)
  • Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes (This relates to Online Travel Agents like MakeMyTrip or Oyo Rooms)
  1. What shall be the rate of tax to be paid by the electronic commerce operator under the reverse charge?

Ans.   For cab services, the GST rate is 5%/12% whereas for travel booking operators it would depend upon the service that you have consumed. (Different for airlines, budget hotels, luxury hotels etc)

  1. Is the tax is payable under reverse charge in all the scenarios for the cab service?

Ans.   No, the following has to be kept in mind:-

  • The services are though electronic commerce operator. (Since the reverse charge is to be paid by the electronic commerce operator)
  • The services relate to the transport of passenger and not goods.
  1. I booked a room via an Online Travel Agent (say MakeMyTrip) for Taj Hotels, Delhi GST is charged by Taj Hotels on all the bills but it was supposed to be paid on reverse charge by make my trip isn’t it?

Ans.   No, the tax would be paid by MakeMyTrip under reverse charge only when the service provider (Taj Hotels) is not registered under the Act. Since in this case the service provider (Taj Hotels) is already registered accordingly, the tax is to be paid under normal charge and not reverse charge.

  1. What are the exemptions available for hospitality industry?

Ans.   Central Government vide Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 (N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 for CGST), has notified certain exemptions. The following exemptions are provided in the GST regime:

“14. Services by a person by way of-

(a)       conduct of any religious ceremony;

(b)       renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under sec 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act), or a trust or an institution registered under sub clause (v) of clause (23C) of sec 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the Income-tax Act:

Provided that nothing contained in (b) of this exemption shall apply to,-

(i)        renting of rooms where charges are INR 1000/- or more per day;

(ii)       renting of premises, community halls, kalyanmandapam or open area, etc where charges are INR 10,000/- or more per day;

(iii)      renting of shops or other spaces for business or commerce where charges are INR 10,000/-or more per month.

15.     Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation less than one thousand rupees per day or equivalent.”

  1. Whether GST is payable under reverse charge mechanism in respect to procurements from the unregistered suppliers?

Ans.   As per section 9(4) of the CGST Act, 2017, a registered recipient is liable to pay GST in respect to supplies received from the unregistered suppliers. However, the Central Government vide Notification No.08/2017-Central Tax (Rate) dated 28.06.2017 (on the similar lines, State Government has also issued Notification) has exempted the value of supply upto ₹ 5,000/- per day per registration for supplies from unregistered suppliers. It may be noted that whole value of supply would be subject to levy of GST if value of supply exceeds from ₹ 5,000/-.

(Sources: CBEC and various notes on web)

Compiled by

CA Sanjay Kumawat

Email id : Sanjay@ksyllp.com

 

By: CASanjay Kumawat - September 26, 2017

 

Discussions to this article

 

My sincere appreciation to the author for covering the issue comprehensively in a simple and lucid style

By: Balasubramanian Natarajan
Dated: 27/09/2017

Thanks to Author for explaining nicely. It would have more useful if detail for applicability of ITC on hotel , conveyance & other related services are explained.

By: MohanLal tiwari
Dated: 28/09/2017

Dear Sir,

  1. What will be GST rate if cost goes up (more than declared tariff) owing to additional bed?

Ans. GST rate would be determined according to declared tariff for the room, and GST at the rate so determined would be levied on the entire amount charged from the customer.

For example, if the declared tariff is ₹ 7000 per unit per day but the amount charged from the customer on account of extra bed is ₹ 8000, GST shall be charged at 18% on ₹ 8000.

Query : What amount we have to show on GST Return ?

And if we will show full amount means ₹ 8,000.00 and GST Charge @ 18% then We have to create 1 Invoice of whole amount ?

Also some few question :-

1- In accodomation services on Intra state but client come from different different states then we have to charges CGST & SGST or IGST ?

2- Because our service is to Un-Registered (Customer) so will we file B2C (other) Column in GSTR-1?

3- According GSTR-1 we have to file return on B2C (other) Column but in that not no option for mention invoice number then can we fill total month invoice value ?

4- Breakfast include on our room tariff but we are issuing total 1 Invoice to customer of total room tariff and not mentioned breakfast amount seperately and breakfast expenses we are showing in our books of account so can we do it ?

Please quote your best suggestion according serial wise.

Awaiting for your best response.

Thanks with regards,

Umesh C Pandey

By: UmeshC Pandey
Dated: 28/09/2017

 

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