GST Essentials for Hotels & Resorts: Rates, Inputs, and Compliance

Learn about GST compliance in hotels and resorts, focusing on room tariffs, food sales, and service taxes, with tips for accurate documentation and return filing from the Udaipur GST Consultant or chartered Accountants.  Also Navigate GST regulations in hospitality: from room tariffs to food sales, ensuring accurate calculations, timely filings, and comprehensive documentation.

1. Introduction

The hospitality industry, including resorts, hotels, and similar establishments, has specific GST regulations governing services, room tariffs, food and beverage sales, and other taxable activities. This article ensures adherence to GST laws, timely filing of returns, accurate tax calculations, and proper documentation.

2. Objectives

• To ensure compliance with GST laws and regulations applicable to the hospitality industry.
• To establish clear guidelines for the collection, payment, and filing of GST.
• To ensure proper documentation for GST-related transactions.
• To ensure transparency and prevent errors in GST reporting.
• To facilitate timely audits and reviews by tax authorities.

3. GST Basics for Resorts and Hotels

GST is a single tax on the supply of goods and services in India, and it applies to the hospitality industry in the following key areas:

• Room Tariff (Accommodation Services):
• Less than ₹1,000 per night: Nil GST
• ₹1,000 to ₹7,500 per night: 12% GST
• ₹7,500 or more per night: 18% GST

• Food & Beverage (F&B Services):
• Restaurants (without AC and non-licensed): 5% GST (without input tax credit)
• Restaurants (with AC or licensed): 18% GST
• Liquor served in hotels and resorts: Subject to the applicable liquor license laws and is outside the scope of GST.

• Event Management Services (Conferences, Weddings, etc.):
  • GST Rate: 18% or 28%, depending on the nature of the service.
• Additional Services (Spa, Gym, etc.):
  • GST Rate: 18% on services like wellness and spa treatments, swimming pool usage, etc.
• Exemptions:
  • GST exemptions may apply to certain activities like renting of rooms with less than ₹1,000 per day, or food services provided by smaller establishments, depending on specific conditions.

4. GST Procedure for Different Segments

4.1 GST on Room Rentals

• Invoice Generation:
  • Issue GST-compliant invoices to guests for room bookings.
  • The GST rate should be based on the applicable room tariff and GST slab.
• Advance Payments:
  • GST is applicable on advance payments received for future bookings.
  • The GST should be charged and reflected in the books at the time of receiving the advance.
• Tax Credit and Adjustments:
  • Input Tax Credit (ITC) can be claimed for GST paid on inputs and services used to provide the accommodation services.

4.2 GST on Food & Beverage (F&B) Services

• Restaurant Services:
  • GST on food and beverage services is charged at 5% (with input tax credit allowed).
  • Provide GST-compliant bills for all F&B transactions.
• Outdoor Catering:
  • GST at 18% is applicable for catering services provided outside the premises.
• Banquet Services:
  • GST on event services (weddings, conferences) varies between 18% to 28% based on the nature and size of the event.

4.3 GST on Additional Services (Spa, Gym, etc.)

• Spa and Wellness Services:
  • GST at 18% is applicable for spa and wellness services.
• Gym and Health Club Services:
  • GST at 18% is applicable, subject to the nature of the service provided.

4.4 GST on Event and Conference Services

• Conferences, Meetings, and Events:
  • GST is applicable at 18% or 28%, depending on the complexity and luxury of the event.
• Event Management Services:
  • GST is applicable at 18% for services related to event organization, including setting up and organizing conferences, weddings, etc.

4.5 GST on Other Ancillary Services

• Transportation Services (Shuttle, Cab):
  • GST is applicable at 5% (with input tax credit available) on transportation services provided to guests.
• Laundry and Dry-Cleaning Services:
  • GST at 18% applies to laundry services provided by the hotel or resort.

5. Availment of GST Input Tax Credit (ITC), the ineligibility of ITC, and the Reverse Charge Mechanism (RCM) provisions under the Goods and Services Tax (GST) Act-

• Availment of ITC for eligible inputs, input services, and capital goods.
• Identification of ineligible ITC.
• Understanding and compliance with the RCM provisions under GST for the business operations of resorts and hotels.

5(A) Eligibility for ITC (Input Tax Credit)

Under Section 16 of the CGST Act, businesses are eligible to claim ITC on taxes paid on purchases if they meet the following criteria:

5(A)1  Conditions for Eligibility

1. Registered Taxpayer: The taxpayer must be GST-registered.
2. Use for Business: Goods and/or services must be used for furthering business activities (including taxable or exempt supplies).
3. Valid Invoices: ITC can be availed only if the goods/services are supported by a valid GST invoice or documentary evidence.
4. Goods and Services Receipt: Goods and/or services should be received by the taxpayer.
5. Returns Filing: The taxpayer should have filed GST returns (GSTR-3B, GSTR-1, etc.) on time.

5(A)2 Eligible Goods and Services for ITC in Resort and Hotel Business

• Accommodation Services: ITC can be claimed on inputs and input services like furniture, linens, stationery, and hotel management software.
• Restaurant Services: GST paid on raw materials, packaging materials, and services like cleaning, pest control, and interior maintenance can be claimed as ITC.
• Spa and Wellness Services: ITC on purchases of oils, creams, and equipment used in spa services.
• Event Management & Banquets: ITC on services availed for event organization, sound, lighting, and catering, etc.
• Tourism-related Services: ITC can be claimed for services availed for managing tourist groups, transport arrangements, and site visits.

5(A)3 Eligible ITC on Capital Goods

• Capital Goods such as furniture, fixtures, machinery, and hotel infrastructure like air conditioners, elevators, etc., are eligible for ITC under GST.

5(A)4 Special Conditions for Input Services

 Certain services availed for business operations are eligible for ITC:

• Advertising and marketing services for promoting the hotel.
• Legal and consultancy services.
• Travel/transportation services for business-related purposes.
• Security services.

5(A)5 Tax Collection at Source (TCS)

o    Online travel agents (OTAs) like MakeMyTrip, Goibibo, etc., are required to collect TCS on behalf of hotels when a booking is made through their platform. This TCS must be deposited with the government and reflected in the hotel’s GST returns.

   5(B) Ineligible ITC (Blocked Credits)

As per Section 17(5) of the CGST Act, there are specific goods and services for which ITC cannot be claimed.

5(B)1 Ineligible ITC for Resorts and Hotels Business

1. Food & Beverages:
   1. ITC on outdoor catering, restaurant services, and non-business meals (e.g., guest meals that are not used for business purposes) is ineligible.
2. Personal Consumption:
   1. ITC is not allowed on any goods or services used for personal consumption of employees or guests, such as personal grooming products or spa services used by employees for personal reasons.
3. Member Services:
   1. If services are provided to members (e.g., in a club setup), ITC on services such as membership fees or charges for services to members may be blocked if the service is used for non-business purposes.
4. Motor Vehicles:
   1. ITC on vehicles like cars (except for the transport of goods) is blocked under the Act. However, ITC can be claimed if the vehicles are used for transportation of goods (e.g., guest transport or hotel logistics).
5. Entertainment, Amusement, and Clubbing Services:
   1. If the resort or hotel provides entertainment (e.g., movie screening, recreational activities), ITC may not be available unless the services are directly tied to business operations.
6. Construction Services:
   1. ITC on services related to the construction of immovable property (e.g., development of a new hotel wing) is generally blocked unless the property is used for taxable business activities.
7. Health and Fitness:
   1. ITC is ineligible for health-related services used by employees (like gym memberships), except where the services are directly for business purposes.
8. Other Blocked Credits:
   1. Goods and services for personal use not related to the hotel business, like decorative items used in the owner’s private space, are not eligible for ITC.

5(C). Reverse Charge Mechanism (RCM) under GST

Under certain circumstances, the Reverse Charge Mechanism (RCM) is applicable where the recipient of goods/services (the taxpayer) is liable to pay GST instead of the supplier.

5(C)1 RCM Applicability for Resorts and Hotels

1. Goods and Services Received from Unregistered Suppliers:
   1. When goods and services are received from unregistered suppliers, the resort/hotel is liable to pay GST under RCM.
   1. This includes goods like furniture, linen, and other supplies from unregistered vendors.
2. Services under RCM:
   1. Security services: RCM applies if the hotel outsources security services from unregistered contractors.
   1. Legal services: RCM applies if the hotel avails legal services from an unregistered advocate.
   1. Transportation of goods: RCM applies when transportation services for the hotel are availed from unregistered transporters.
3. Other Goods and Services under RCM:
   1. Casual Taxable Person: RCM is applicable if a resort or hotel avails services from a casual taxable person (e.g., temporary services, short-term event management).
   1. Renting of Motor Vehicles: If the resort hires a vehicle for guest transportation from an unregistered entity, RCM will apply.
   1. Supply of goods and services by a person located outside India (import of services).

5(C)2 Payment and Documentation Under RCM

• GST Return Filing: The resort/hotel must pay tax under RCM via GSTR-3B and declare the same.
• Invoice and Documentation: The resort/hotel must maintain proper invoices or payment vouchers, which clearly mention that RCM is applicable.

5(C)3 Provisional Credit under RCM

In certain cases, input tax credit under RCM may be claimed by the taxpayer once GST is paid, provided that the tax is reflected in the GSTR-2B and the invoice is available.

6. GST Invoicing and Documentation

• GST Invoice Requirements:
  • All invoices issued for goods and services must comply with the following:
    • GSTIN of the resort/hotel.
    • GSTIN of the customer (if applicable).
    • Invoice date and number.
    • HSN/SAC codes for goods and services.
    • Total amount and GST amount (CGST, SGST/IGST).
    • A clear description of the services provided.
• Records Maintenance:
  • Maintain detailed records of all invoices, receipts, and supporting documents for a minimum of 6 years.
  • Ensure that all input and output tax credits are properly documented.

7. GST Returns and Filing

• Monthly/Quarterly Returns:
  • File GSTR-1 for outward supplies (sales) by the 11th of every month.
  • File GSTR-3B for summary of outward and inward supplies, and pay GST by the 20th of every month.
• Annual Returns:
  • File GSTR-9 annually, consolidating all GST-related data.
• GST Payment:
  • Ensure timely payment of GST for the respective tax period, avoiding penalties and interest.
• Reconciliation:
  • Perform regular reconciliation of GST records with the accounting system to ensure accurate tax filings.
• Key GST Filing Dates for Hotel (FY 2024-25)

Return	Due Date	Notes
GSTR-1	11th of every month	Monthly returns for outward supply
GSTR-3B	20th of every month	Monthly returns for tax paid
GSTR-9 (Annual Return)	31st December of the subsequent year	Annual return for the previous financial year

8. GST Audits and Reviews

• Internal Audits:
  • Conduct periodic internal audits to check for compliance with GST laws.
  • Cross-check tax calculations and returns before submission.
• GST Audits by Tax Authorities:
  • Be prepared for external audits by tax authorities. Ensure that all records, invoices, and returns are readily available for inspection.

9. GST on Export of Services

If the resort/hotel provides services to foreign clients (i.e., foreign tourists or businesses), the following conditions must be met for the services to be classified as exports:

• The foreign customer must pay in foreign currency.
• The service must be provided outside India or to a person who is located outside India.

Exported services are typically zero-rated under GST, meaning no GST is charged, but the resort/hotel can claim a refund on input taxes.

10. GST Compliance Checklist on Hotels, Resorts, and Spas

• GST registration for the business.
• Regular review of applicable GST rates.
• Issuance of GST-compliant invoices for all services.
• Timely filing of GST returns (GSTR-1, GSTR-3B, etc.).
• Maintaining complete records of all transactions.
• Regular reconciliation of input tax credit (ITC).
• Payment of GST within due dates.
• Audit of GST filings and records periodically.

11. Penalties and Consequences for Non-Compliance

• Late Filing Fees:
  • A penalty of ₹50 per day (₹25 for CGST and ₹25 for SGST) will be levied for late filing of returns.
• Interest:
  • Interest at 18% per annum will be charged on any delayed payment of GST.
• Other Penalties:
  • Penalties for incorrect invoices, under-reporting, or failure to maintain records may be imposed.

Master GST and Udaipur GST Consultants and The best Chartered Accountants for hotels and resorts: essential guidelines for compliant tax filing, accurate tariff calculations, and comprehensive service documentation. Consult for solution.