Frequently Asked Questions On 'Restaurant Services' Supplied At 'Specified Premises'

The ("CBIC") has issued frequently asked questions (‘FAQ') on the taxation of Restaurant services and has clarified following:

• Specified premises have been clarified as the premises providing ‘hotel accommodation services' where the value of supply of any unit of accommodation is more than INR 7500/- per unit per day or equivalent during the preceding financial year (‘FY').
• The FAQ clarifies that the applicable rate of tax for the ‘Restaurant Services' supplied in ‘specified premises' is 18%1 w.e.f.¹ April 2025, with input tax credit [ITC].
• The change in the definition of the specified premises has been clarified to state that it will no more be linked to the declared tariff but be determined based on the value of supply of ‘hotel accommodation service' provided in the preceding FY.
• Service providers qualifying as providing services from ‘specified premises' mandatorily need to file a declaration to this effect in the format notified as Annexure VII (in Notification No. 11/2017 dated 28 June 2017), anytime between 1^st January to 31^st March of the preceding FY. Other existing registrants or new applicants can also voluntarily declare their premises as specified premises for a particular FY. Once such declaration is made it cannot be altered. FAQ also provides the illustrations on who can or cannot file the declaration. Other relevant clarifications on the form and manner of the declaration and its acceptance are as follows:
  • The timelines as prescribed for filing the declaration are to be strictly adhered to. The declarations are to be filed physically/ manually before the jurisdictional GST authorities till electronic filing of these declarations is enabled. Suppliers have been permitted to submit the declaration forms even through email or post.
  • New registrants can file the declaration within 15 days of obtaining the acknowledgement for the registration in Form GST REG 02.
  • Supplier providing hotel accommodation service from multiple premises under a single registration, will be required to file separate declarations for each the premises.
  • Where a hotel accommodation supplier has charged more than ₹7,500 per unit per day in FY 2024- 25, the premises will automatically be classified as a specified premises for FY 2025-26. However, if no unit is supplied for a value above ₹7,500 per day in FY 2025-26, the premises will not automatically be classified as a specified premises for FY 2026-27 unless such supplier voluntarily opts-in to be classified as a ‘specified premise' by filing the declaration within the prescribed time limit.
  • Inversely where a supplier has voluntarily opted in as a 'specified premises' for FY 2025-26, such supplier would not automatically lose the ‘specified premises' status in FY 2026-27 even if no supplies above ₹7,500 is undertaken in FY 2025-26. To opt out for FY 2026-27, such suppliers must mandatorily file a declaration between January 1 and March 31, 2026.
  • Dated acknowledgement shall be given [through email or post till the introduction of the electronic system] by the jurisdictional authority on receipt of declaration forms.
  • The declaration is treated as filed on ‘self-assessment' basis by the suppliers. The jurisdictional authorities will only verify the completeness of the declaration and issue dated acknowledgement, without scrutinizing other aspects of the declaration, including whether the taxpayer is eligible to file the declaration or not.
  • The ‘opt-in' declarations will be valid until the taxpayer decides to ‘opt-out' by filing a declaration in Annexure IX. The time limit to file such ‘opt-out' declaration is also between 1^st January and 31^st March of the preceding FY. The opt-out will be valid until the taxpayer ‘opts-in' again.
  • Where a supplier voluntarily declaring to be categorized as a ‘specified premises' for FY 2025-26, for any reason changes this decision, the supplier can file an opt-out declaration before the same jurisdictional authority again before 31^st March 2025. The supplier shall not be allowed to file another opt-in declaration after filing of such opt out declaration for FY 2025-26. The same also applies to the cases where the supplier files an opt-out declaration and later on decides to opt-in to declare their premises as specified premises. 
• Where the taxpayer has multiple premises from which they supply hotel accommodation service and some of them are ‘specified premises' while other are not, in such case the applicable tax rate and availability of ITC for the restaurant service shall be as under:
  • For Restaurant Services [except at specified premises], the GST rate is 5% without ITC and thus, ITC on goods and services used exclusively for such restaurant services cannot be claimed. If the goods and services are used partly for such restaurant services and partly for other supplies (including restaurant services at specified premises), the ITC needs to be reversed by considering the restaurant service provided from non-specified premises as exempt.
  • For Restaurant Services [at specified premises], the GST rate is 18% with ITC.
• If a supplier of hotel accommodation services operates within a mall and has not supplied any unit of accommodation above ₹7,500 in the preceding FY, but has still declared the premises where Restaurant X is situated, as a specified premises through Annexure VII. There is another restaurant Y which is situated in the mall but outside the specified premises, in such case, the tax rates for restaurants operated within the mall shall be:
  • Restaurant X – 18% GST, as it is located within the specified premises where hotel accommodation services are rendered.
  • Restaurant Y – 5% GST, as it is outside the specified premises but within the same mall.
• The revised provisions of ‘specified premises' are also applicable for determining the rate applicable on the catering services².

Aurtus comments:

• The CBIC FAQs on specified premises and the taxability of restaurant services provide much-needed clarity on the implications of the revised definition of "specified premises”. The omission of the definition of declared tariff removes an outdated concept, considering the dynamic pricing model now widely adopted by the hotel industry. While declared tariff was relevant under entertainment tax and luxury tax regimes, its absence in the GST framework eliminates ambiguity regarding applicable tax rates. Previously, due to the lack of a concrete document to establish the declared tariff, the industry faced various allegations from the department on valuation of supply.
• Further, the FAQs clarify that once a supplier opts in as a specified premises, they do not automatically revert to a non-specified premise status unless an opt-out declaration is filed within the prescribed period. This enhances predictability for both taxpayers and revenue authorities. While the procedure will introduce an additional compliance burden for taxpayers, linking taxability to the highest value of accommodation provided in the preceding FY ensures certainty on the applicable tax rate for restaurant services. However, the absence of a rectification mechanism for inadvertent errors or non-filing could lead to future disputes and litigation. Introducing and implementing a structured correction framework would help mitigate such issues.

Circular on issues related to availment of benefit of section 128A of the CGST Act [Amnesty Scheme] – Circular No. 248/05/2025-GST dated 27 March 2024

CBIC has issued a clarification on the various issues faced by the industry in availing the benefit of the amnesty scheme. The issue wise clarification is as under:

• It has been clarified that the taxpayers can avail the benefit of the amnesty scheme even where the payment of tax has been made through Form GSTR 3B prior to the issuance of demand notice/ adjudication order before 1^st November 2024, subject to verification by the proper officer.
• To harmonize the scheme process for consolidated demands for periods covered [i.e., FY 2017-18 to 2019- 20] as well as not covered under section 128A, amendments have been made in Rule 164(4) and proviso to Rule 164(7) to allow the taxpayer to file an application in Form SPL-01 or Form SPL-02 after making payment of tax liability only for the periods covered under section 128A [prior to filing of the application under the scheme]. Thereafter the taxpayer will intimate the First Appellate Authority or Appellate Tribunal of his intent to avail the benefit under section 128A for the prescribed period and not pursue the appeal for the said period covered under section 128A. The First Appellate Authority/ Appellate Tribunal will then restrict itself to passing an order only for the period not covered under section 128A.

Aurtus comments:

• The last-minute clarification provides much-needed certainty, ensuring taxpayers can fully benefit from the amnesty scheme as intended. Since the tax was already discharged through returns, enforcing separate payments through DRC-03 for the same amounts would have led to dual payments, resulting in undue hardship for the applicants.
• Additionally, allowing partial amnesty benefits for a consolidated demands/ order or notice is in line with the spirit of the scheme. However, given the timing of the clarification, its practical effectiveness remains a point of discussion.
• The Karnataka High court in Toshiba Software [2025(3) TMI 1176] quashed the order issued for multiple periods and instructed the authorities to pass separate orders for each year so that the Noticee can avail benefit of the amnesty scheme for the specified periods. While the law on SCNs for multiple periods is still not settled and is under challenge before various courts, the amendment will provide a muchneeded relief specifically where the Noticee intends to opt for the amnesty scheme. However, practical challenge remains – whether order will indeed be split and, if so, whether they will remain valid if issued beyond the period of limitation.

Footnotes

1. Entry 7(vi) of the Notification No. 11/2017 Central Tax (Rate) dated 28 June 2017

2. Sr. No. 7 of Notification No. 11/2017 Central Tax (Rate) dated 28 June 2017

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