Compliance
GST on hotel rooms
Accommodation in India is taxed by tariff slab, which means the rate on a room night depends on what you charged for it. This guide explains the structure, how restaurants and banquets differ, and the invoice mistakes that cause trouble months later — without quoting percentages that will be out of date.
- Accommodation is taxed by tariff slab, not one flat rate — the rate follows the value of the room night.
- Restaurant and banquet services are taxed on their own basis, separately, on the same folio.
- Capture the guest's GSTIN at check-in, not at checkout.
- Never edit an issued invoice. Issue a credit note referencing it.
- The software test is not "does it know the rate" but "can the rate be changed easily when it moves".
The structure, not the numbers
The single most important thing to understand about GST on Indian hotel rooms is that it is slab-based. Unlike a flat service tax, the rate applied to a room night depends on the value of that room night.
The practical consequence for a hotelier is that your tax rate is not a property setting. A property selling rooms at ₹2,000 in the off season and ₹6,000 during a festival may be applying different rates across the year — on the same room, to the same room type, without anybody changing a configuration.
Your GST rate is a property of the transaction, not of the hotel.
That is why software matters here more than in most tax situations. A system where somebody typed a single tax percentage into a settings screen at go-live will be quietly wrong for part of the year.
What determines the slab
The applicable slab is determined by the value of the accommodation supplied. Three practical points that follow from that:
- Discounts can move a room between slabs. If a rate near a threshold is discounted below it, the applicable rate can change. The tax follows the value actually charged, not a rack rate nobody pays.
- Rate plans matter. Room-only, breakfast-included and full-board plans are priced differently, so the same room can sit in different slabs depending on the plan sold.
- Extra pax and extra beds change the value of the room night and therefore can change the treatment.
This is also why letting your team book everything on a typed "special" rate is more than an operational nuisance — it can put the tax calculation on a value nobody has controlled.
Place of supply and the tax split
Accommodation is supplied where the property is located. The practical effect is that a hotel bill normally carries CGST plus SGST of the state the hotel is in — including for a guest travelling from another state.
This surprises corporate guests regularly. A company in Maharashtra booking a room in Karnataka receives an invoice with Karnataka SGST, which affects how their accounts treat it. It is worth your reception team being able to explain this rather than being argued with at checkout.
Restaurants and banquets
A hotel folio frequently carries three different kinds of supply, and they are not taxed the same way.
| Supply | How it is treated | What the invoice needs |
|---|---|---|
| Accommodation | By tariff slab, on the value of the room night | Separate line, own rate, accommodation SAC |
| Restaurant service | Its own basis, which can depend on the establishment | Separate line, own rate, restaurant SAC |
| Function and banquet services | Its own basis; often several elements combined | Food, hall hire and inclusions shown separately |
The banquet case is the one that catches properties out, because a single function bill may combine per-plate catering, hall hire, and priced inclusions like a DJ, decor and lighting. Presenting that as one total makes correct treatment impossible to demonstrate later. See banquet management for how the itemisation should look.
What a hotel invoice must show
Without stating rates, the structural requirements are stable and worth checking your invoices against:
- Your GSTIN and legal entity name as registered.
- A sequential invoice number with no gaps and no reuse.
- Guest name and address, and their GSTIN where the bill goes to a registered business.
- Each supply on its own line — accommodation, restaurant, laundry, transfers — with its own taxable value.
- The tax rate and amount per line, split into CGST and SGST or shown as IGST.
- SAC codes appropriate to each service.
- Place of supply stated.
- The total in figures, and any advance adjusted against it clearly shown.
Corporate guests and input credit
A company paying for a stay generally wants to claim input credit, which requires their GSTIN on a correctly issued invoice. Three practical habits make this painless:
- Capture the GSTIN at check-inNot at checkout. At checkout the guest is leaving, the receptionist is busy, and mistakes get typed.
- Store it on the corporate accountSo the same company never has to provide it twice, and so it cannot be entered differently on two visits.
- Set the billing split in advanceIf the company pays room and tax while the guest pays extras, that routing should be a property of the account rather than something remembered at the desk.
Six mistakes that cause trouble later
| Mistake | Why it matters |
|---|---|
| A single tax rate set once in configuration | Wrong for part of the year, and nobody notices until an audit or a return |
| Editing or deleting an issued invoice | Breaks the sequence and destroys the audit trail. Use a credit note |
| Combining room and restaurant on one line | Makes correct treatment impossible to demonstrate |
| Collecting GSTIN at checkout | Errors, omissions, and a guest who has already left |
| Banquet bills as a single total | Several supplies with different treatment presented as one |
| Booking on typed "special" rates | The tax follows a value nobody controlled or recorded properly |
What to expect from your software
The right question when evaluating a system is not "does it know the current rate" — any product can be configured once. It is whether the structure is correct and maintainable.
- Slab applied by tariff, automatically, per transaction rather than as a property default.
- CGST/SGST or IGST determined by place of supply rather than typed by a receptionist.
- Separate treatment per service type on one folio — accommodation, restaurant, functions.
- SAC codes held against service types, not remembered.
- Corporate GSTIN stored on the account and applied automatically.
- Credit notes that reference the original invoice, with issued invoices locked from casual editing.
- Rates that you or your vendor can update easily when they change — this is the one that protects you long term.
- Filing-ready summaries your CA can work from without rebuilding the month.
Frequently asked questions
How is GST charged on hotel rooms?
By tariff slab rather than a flat rate, so the applicable rate depends on the value of the room night. Slabs have been revised several times since 2017 — confirm current rates with your CA.
Published tariff or discounted rate?
Generally the value actually charged rather than a rack rate. This matters because a discount can move a room night into a different slab.
CGST/SGST or IGST?
Accommodation is supplied where the property is, so normally CGST plus SGST of that state, even for out-of-state guests. Specific cases exist — confirm with your CA.
How is restaurant service taxed differently?
On its own basis, separate from accommodation, shown as its own line on the folio. See PMS with restaurant POS.
Do I need the guest's GSTIN?
Where the bill goes to a registered business claiming input credit, yes — captured at check-in, stored on the corporate account.
What is a SAC code?
The Services Accounting Code, the services equivalent of HSN. Accommodation, restaurant and function services carry different codes.
How do I correct an invoice with the wrong GST?
Issue a credit note referencing the original, then a corrected invoice. Never edit or delete an issued invoice. See hotel billing software.
Is GST charged on cancellation charges?
Retention and cancellation charges are generally treated as consideration for a supply, though the treatment has been debated and clarified more than once. Ask your CA specifically.
How is GST handled on banquet bills?
Function services are taxed on their own basis, and a banquet bill often combines food, hall hire and inclusions — each shown separately rather than as one total.
Can hotel software handle GST automatically?
Good software applies slabs by tariff, splits tax by place of supply, carries SAC codes and produces filing-ready summaries. Test whether rates can be updated easily when they change.