Significant clarifications have been provided by the Central Board of Indirect Taxes and Customs (CBIC) regarding the definition and implications of ‘specified premises’ under the Goods and Services Tax (GST) Law. These clarifications, detailed in recent FAQs, are crucial for businesses involved in hotel accommodation and restaurant services, particularly concerning changes effective from April 1, 2025. Guidance is offered on definitions, applicable tax rates, declaration procedures, and related compliance matters.
Shift from ‘Declared Tariff’ to ‘Value of Supply’
A fundamental change is being introduced effective April 1, 2025.
> Prior to April 1, 2025: The concept of ‘declared tariff’ was used. Specified premises were those providing hotel accommodation with a declared tariff above ₹7,500 per unit per day, regardless of discounts.
> From April 1, 2025: The definition of ‘declared tariff’ will be omitted. The determination of whether a premises qualifies as ‘specified premises’ will be based on the actual ‘value of supply’ (transaction value) of hotel accommodation provided in the preceding financial year.
This change aims to align the definition with dynamic pricing models prevalent in the hotel industry and provide certainty regarding a premises’ status for an entire financial year.
Revised Definition of ‘Specified Premises’ (Effective April 1, 2025)
For a financial year, ‘specified premises’ means:
> A premises from which ‘hotel accommodation’ service was provided in the preceding financial year, where the value of supply for any unit of accommodation exceeded ₹7,500 per unit per day or equivalent. (Mandatory Qualification)
> A premises for which a registered person supplying ‘hotel accommodation’ service has filed a declaration (Annexure VII) between January 1st and March 31st of the preceding financial year, declaring it as specified premises. (Optional Opt-in for Existing Registrants)
> A premises for which a person applying for registration has filed a declaration (Annexure VIII) within 15 days of obtaining the registration application acknowledgement (ARN), declaring it as specified premises. (Optional Opt-in for New Registrants)
GST Rate Implications for Restaurant Services
The classification as ‘specified premises’ directly impacts the GST rate applicable to restaurant services supplied from such locations:
> Restaurant Services at Specified Premises: A GST rate of 18% is applicable, with the benefit of Input Tax Credit (ITC). [Entry 7(vi), Notification No. 11/2017-CTR]
> Restaurant Services outside Specified Premises: A GST rate of 5% is applicable, without the benefit of ITC. [Entry 7(ii), Notification No. 11/2017-CTR]
The Declaration Mechanism: Opting In and Out
An option is provided for suppliers of hotel accommodation services to declare their premises as ‘specified premises’, even if they do not meet the mandatory value threshold. This allows associated restaurants to utilize the 18% GST rate with ITC.
Who Can File?
> Registered persons supplying hotel accommodation service (using Annexure VII).
> Persons applying for GST registration intending to supply hotel accommodation (using Annexure VIII).
When to File?
> Annexure VII (Existing Registrants – Opt-in): Between January 1st and March 31st of the financial year preceding the year for which the declaration is intended.
> Annexure VIII (New Registrants/New Premises – Opt-in): Within 15 days of receiving the ARN (FORM GST REG-02) for new registrations, or when setting up a new premises under an existing registration.
> Annexure IX (Opt-out): Between January 1st and March 31st of the financial year preceding the year from which the taxpayer wishes to opt-out.
Validity:
> Declarations (Opt-in Annexures VII/VIII) remain valid for subsequent financial years unless an Opt-out declaration (Annexure IX) is filed.
> An Opt-out declaration (Annexure IX) also remains valid until a subsequent Opt-in declaration (Annexure VII) is filed.
> This system avoids the need for repeated annual filings.
> The status (‘specified’ or ‘not specified’) remains fixed for the entire financial year and cannot be changed mid-year. Declarations filed between Jan 1st and Mar 31st take effect from April 1st of the next financial year.
Filing Modality:
> Initially (for FY 2025-26 declarations), forms are to be filed physically/manually or via email/post with the jurisdictional GST authority until electronic filing is enabled.
> A dated acknowledgement will be issued by the authority. Filing is treated on a ‘self-assessment’ basis initially.
Change of Mind:
If an opt-in (Annexure VII) or opt-out (Annexure IX) declaration is filed between Jan 1st and Mar 31st, and the filer changes their mind, the opposite declaration (opt-out or opt-in respectively) can be filed before March 31st. The last declaration filed by March 31st will be considered final for the upcoming financial year. One cannot opt-out in the first year of registration after filing Annexure VIII.
Mandatory vs. Optional Status Clarifications
> If any unit of accommodation was supplied at a value exceeding ₹7,500 in the preceding financial year, the premises automatically and mandatorily becomes ‘specified premises’ for the current financial year. No declaration is needed in this case.
> If the mandatory threshold was not met in the preceding year, the premises is not automatically specified premises for the current year. The supplier must file Annexure VII between Jan 1st and Mar 31st of the current year if they wish it to be treated as specified premises for the next financial year.
> If a premises was mandatorily specified in Year 1 (due to Year 0 supplies >₹7500) but did not supply any unit >₹7500 in Year 1, it will not be mandatorily specified in Year 2. No opt-out declaration is needed to revert to non-specified status in Year 2 unless an opt-in declaration had previously been filed and remains active.
Handling Multiple Premises
> The ‘specified premises’ status is determined on a premise-by-premise basis, even under a single GST registration.
> If one premise mandatorily qualifies (>₹7,500 supply), it does not automatically make other premises under the same registration ‘specified premises’.
> Separate declarations (Annexure VII, VIII, or IX) must be filed for each premise if opting in or out voluntarily.
Input Tax Credit (ITC) Treatment with Mixed Premises
If a supplier operates both specified (18% rate) and non-specified (5% rate) restaurants:
> ITC on goods/services used exclusively for the 5% rate restaurant service cannot be taken.
> ITC on common goods/services used partly for the 5% rate service and partly for other services (including the 18% rate restaurant) must be reversed. The reversal calculation should treat the supply of restaurant service at 5% (other than at specified premises) as an exempt supply.
Applicability to Catering Services
Yes, the revised definition of ‘specified premises’ and the associated rate implications also apply to catering services provided at specified premises versus other locations, as per Sl. No. 7 of Notification No. 11/2017-CT(Rate).
Key Dates & Transition
> Effective Date: The revised definition and rules come into force from April 1, 2025.
> First Declaration Window (for FY 2025-26): Opt-in (Annexure VII) or Opt-out (Annexure IX) declarations for FY 2025-26 can be filed between January 16, 2025, and March 31, 2025.
> New Registrations (Jan 16 – Mar 31, 2025): Declarations (Annexure VIII) filed during this period will apply from FY 2025-26 onwards, not for the remainder of FY 2024-25. Opting-out for FY 2025-26 is not possible in this scenario.
> New Registrations (Post April 1, 2025): Declarations (Annexure VIII) filed will be valid for the remainder of the financial year of registration and subsequent years, unless opted-out later.
Conclusion
The change in the definition of ‘specified premises’ based on the preceding year’s value of supply, coupled with the declaration mechanism, represents a significant shift for the hotel and restaurant sector. Businesses must carefully assess the supply value from each premise in the preceding financial year to determine mandatory status. Where status is not mandatory, a conscious decision regarding filing opt-in or opt-out declarations within the specified timelines is required to ensure correct GST rates (18% with ITC or 5% without ITC) are applied to restaurant and catering services, and ITC is managed correctly. Timely compliance with the declaration process is essential. Declaration forms are available via Notification No. 05/2025-CT(Rate) and on the CBIC website.
Disclaimer:
The information provided in this blog post is intended for general informational purposes only and is based on the understanding of GST regulations and CBIC FAQs as of the date of publication. Readers should not act upon this information without seeking specific advice from qualified professionals familiar with their particular situation.
CBIC’s FAQs on Revised GST Rules relating to ‘Restaurant Service’ supplied at ‘Specified Premises’ (dated 27/03/2025)