GSTN enables online opt-in for “Specified Premises” declarations.
The GSTN Advisory dated 04.01.2026 introduces an online facility for filing opt-in declarations to classify hotel accommodation premises as "Specified Premises" under Notification No. 05/2025-Central Tax (Rate), which amends Notification No. 11/2017-Central Tax (Rate). This classification is crucial as it determines whether restaurant services supplied at these premises are taxed at 18% with Input Tax Credit (ITC) or 5% without ITC, significantly impacting the GST liability and cash flow of hotel businesses.
Key Legal Provisions
- Notification No. 05/2025-Central Tax (Rate) dated 16.01.2025 amends Notification No. 11/2017-Central Tax (Rate).
- A premises becomes "specified premises" for a financial year if it meets the ₹7,500 per unit per day threshold in the preceding financial year or if an opt-in declaration is filed.
- Opt-in declarations can be filed by existing registered persons between 01 January and 31 March of the preceding financial year (Annexure VII) or by new registration applicants within 15 days of acknowledgement/ARN for the registration application (Annexure VIII).
- The declaration continues for subsequent financial years unless an opt-out declaration is filed (Annexure IX).
- The GSTN Advisory dated 04.01.2026 operationalizes the declaration mechanism on the GST Portal, allowing eligible taxpayers to file declarations electronically.
Interpretation & Analysis
The concept of "Specified Premises" is premises-wise and financial-year based, giving hotels the flexibility to classify each premises separately based on the preceding financial year’s threshold or by opting in. This classification directly affects the GST rate and ITC availability for restaurant services supplied at these premises. Hotels must evaluate the benefits and implications of opting in, considering factors such as eligible ITC, customer mix, and pricing strategies. The ability to utilize ITC on eligible inward supplies can provide a significant cash flow advantage, but it requires strong controls and documentation.
Illustrative Scenario
Consider a hotel, XYZ Ltd., which has two premises, Premises A and Premises B. In the preceding financial year, Premises A had room nights billed above ₹7,500 per day, making it a "specified premises" for the current financial year. Premises B, however, did not meet this threshold. XYZ Ltd. can opt-in for Premises B by filing Annexure VII between 01 January and 31 March of the preceding financial year, allowing it to classify Premises B as "specified premises" and potentially benefit from the 18% with ITC rate for restaurant services supplied at that premises.
Strategic Impact
To maximize the benefits under this framework, hotels should conduct a premises-wise cost-benefit analysis, considering factors such as eligible ITC, customer mix, and pricing strategies. They should also strengthen ITC controls and ensure strict calendar compliance with the prescribed filing windows. Additionally, hotels that filed declarations manually for FY 2025-26 must ensure timely electronic filing for FY 2026-27 within 01.01.2026 to 31.03.2026 to maintain continuity and avoid classification or compliance disputes. By doing so, hotels can optimize their GST liability, cash flow, and operational efficiency, ultimately enhancing their competitiveness in the market.
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