Planning to Dine Out or Stay at Hotels? Be Ready to Pay More if You're Visiting 'Specified Premises' Hotels

If you are planning to dine out or a stay at a luxury hotel, get ready to spend a little more than usual. From 1 April 2025, hotels classified as 'specified premises' have started charging 18% Goods and Services Tax (GST) on food served at their in-house restaurants. This is a big jump from the earlier 5% GST rate that many of us were used to paying.

So, if you are celebrating a birthday, hosting a small get-together, or simply treating yourself to a lavish meal at a hotel restaurant, your bill will now reflect the new 18% GST. For the common man, especially those who enjoy occasional luxury dining or plan functions in hotel premises, the change definitely means spending more.

What Exactly are 'Specified Premises' Hotels?

As per a government circular issued on 27 March 2025, a 'specified premise' is any hotel where the supplier charged room tariffs above Rs 7,500 per night for even one room in the previous financial year. Even if just one unit was priced higher, the hotel's restaurant is bound by the new GST rules.

Hotels have to declare their status every year between 1 January and 31 March annually. New hotels need to make the declaration within 15 days of registration. Once a hotel declares itself as a specified premise, it can claim input tax credits on various expenses, which can help manage their costs better. However, whether this saving will trickle down to customers remains to be seen.

This new rule applies to hotels offering rooms priced above Rs 75,000 per night. Meanwhile, hotels that do not fall under this category have a choice that they can either continue charging 5% GST or switch to 18% and claim input tax credits.

For diners and guests, though, the new tax means a straightforward increase in the cost of food and services at these hotels.

How Will It Impact Customers?
This results in rapid, noticeable impacts for hotel's customers. It will now cost extra to eat at a five-star hotel's restaurant or even a mid-range hotel with one or two expensive rooms. Because of the 18% GST, a lunch or dinner that used to cost Rs 2,000 now costs almost Rs 2,360.

The impact does not stop at individual meals. If you are planning business events, conferences, birthday parties, or even wedding receptions at hotel restaurants, the overall cost will rise because of the higher tax rate. Event organizers and companies hosting off-site meetings at hotels will have to adjust their budgets to accommodate the increased expense.

Hotels, on their part, will need to be more cautious while fixing room tariffs. Previously, restaurants within hotels could charge 5% GST without claiming input tax credits. Now, under the 18% regime, they can claim credits but must carefully plan their pricing strategy. Even if a hotel wants to keep most rooms under Rs 7,500, just one high-end suite crossing the mark could bring the higher GST slab into play.

In the long run, hotels may look for creative ways to absorb some of the costs or offer bundled deals to attract customers. But for now, if you are stepping into a hotel restaurant, you should be prepared for a bigger bill.

The change in GST structure is part of the government's effort to create a uniform and credit-friendly taxation system. While hotels might benefit from input tax credits, customers, particularly those from the middle class planning occasional luxury experiences which will end up paying more for their meals and events.

If you are someone who enjoys treating yourself once in a while at a nice hotel, it might be wise to check in advance whether the hotel is classified as a 'specified premise'. That way, you will know what to expect when the bill arrives!