Bombay HC grants interim stay on 18% GST for hotel-based restaurants

The Bombay High Court has granted an interim stay on the higher Goods and Services Tax (GST) rate of 18% levied on restaurants operating within premium hotels, compared to 5% for standalone restaurants.

Here are the key points from the article:

• The Ruling: The Bombay High Court's Aurangabad Bench granted an interim stay in a case challenging the 18% GST rate for restaurant services within "specified premises."

• Taxation Guidelines:

  • Specified Premises (Premium Hotels): Restaurant services are taxed at 18% with Input Tax Credit (ITC).

  • Others (Standalone Restaurants): Restaurant services continue to be taxed at 5% without ITC.

• Definition of 'Specified Premises': Under GST guidelines effective April 1, 2025, a hotel is considered a 'specified premises' if it charges more than ₹7,500 per room per night for even one room during the previous financial year. Hotels also have the option to voluntarily declare themselves as specified premises.

• Petitioner's Argument: The petitioner argued that the distinction between premium hotel restaurants and others is "arbitrary, irrational, and commercially unjustified," especially since many such restaurants serve walk-in customers who are not hotel guests.

• Industry View: The argument is that restaurants should be taxed based on the service they provide, not their location.

• Next Steps: The High Court has issued notices to the Centre, the Maharashtra government, the GST Council, and other state authorities. The matter will be heard next on November 19.