Library / Goods and Services Tax: The Professional's Master Guide

31. Hospitality, Travel, Transport and Logistics

Most rates in this sector come with a choice: 5% without ITC or 18% with ITC, forward or reverse charge. GST 2.0 removed the 12% options.

31.1 Hotels, restaurants and catering

Hotel accommodation with a value up to Rs. 7,500 per unit per day is taxed at 5% without ITC from 22 September 2025; above Rs. 7,500 it is 18% with ITC. The value is the amount actually charged for the unit per day, not the declared tariff.

Restaurant service is 5% without ITC. Restaurants in "specified premises" charge 18% with ITC. Specified premises are premises from which hotel accommodation of a value above Rs. 7,500 per unit per day was supplied in the preceding financial year, or premises for which the supplier has opted by declaration. Outdoor catering follows the same pattern: 5% without ITC, or 18% where supplied at or from specified premises.

Illustration 164: A hotel bill after GST 2.0

Hotel Sahyadri, Nashik, charged Rs. 9,000 a night for its suites in FY 2024-25, so it is a specified premises in FY 2025-26. Mr. Gupta stays 3 nights in a deluxe room at Rs. 7,000 a night and spends Rs. 6,000 in the hotel restaurant.

Step 1: Room: Rs. 7,000 is within Rs. 7,500, so 5%: 3 x Rs. 7,000 x 5% = Rs. 1,050 (CGST Rs. 525 + SGST Rs. 525).

Step 2: Restaurant: specified premises, so 18%: Rs. 1,080.

Step 3: Total bill = Rs. 29,130.

Step 4: The hotel must split its ITC: credit relating to 5% rooms is not available, while credit relating to suites and the restaurant is. Common credit (lobby, lifts, electricity backup) is apportioned under rule 42 by turnover.

31.2 Tour operators and passenger transport

Tour operator services are taxed at 5% without ITC on the gross package price (credit of tour operator services bought from other operators is allowed). Passenger transport by motor vehicle, such as buses and cabs, is 5% without ITC, except credit of input services in the same line of business (for example, hiring a bus from another operator); the operator may instead opt for 18% with full ITC. Rail travel in AC and first class is 5%. Air travel is 5% in economy and 18% in other classes.

Renting of a motor vehicle designed to carry passengers with the cost of fuel included, supplied by a person other than a body corporate to a body corporate, is under reverse charge where the supplier does not charge tax at the higher rate with ITC (18% after GST 2.0; 12% earlier). Verify the current rate entries for this service after GST 2.0 before advising.

Illustration 165: Cab rental to a company

Singh Travels (a proprietorship) gives a car with driver and fuel to Apex Pvt. Ltd. for Rs. 80,000 a month.

Option 1: Singh Travels charges at 5% without ITC. Apex pays tax under reverse charge = Rs. 4,000.

Option 2: Singh Travels opts for 18% with ITC and charges Rs. 14,400 on its invoice.

Step 1: For Apex, ITC on renting of passenger motor vehicles is blocked under section 17(5)(b) unless an exception applies. So the tax is a cost in both options.

Result: Apex bears Rs. 4,000 under option 1 and Rs. 14,400 under option 2. Corporate customers therefore prefer suppliers who stay on the 5% route.

31.3 Goods transport agencies (GTA)

A GTA is a person who supplies road transport of goods and issues a consignment note. A GTA can choose between (a) 5% without ITC, where tax is paid by the recipient under reverse charge if the recipient is a factory, society, co-operative society, registered person, body corporate, partnership firm or casual taxable person, or by the GTA itself otherwise; and (b) 18% with ITC under forward charge. The option to pay under forward charge is exercised by a declaration in Annexure V on the portal before the start of the financial year (by 31 March), and stays in force for later years until the GTA reverts by a declaration in Annexure VI. Transport of agricultural produce, milk, food grains and small consignments is exempt.

Illustration 166: GTA: 5% under reverse charge or 18% with ITC

Balaji Roadways has annual freight of Rs. 1,00,00,000, all from registered companies. In the year it buys two trucks for Rs. 30,00,000 plus GST of 18% and spends Rs. 8,00,000 plus 18% on tyres and repairs. Diesel is outside GST.

Option A (5%, reverse charge): customers pay Rs. 5,00,000 and take credit. Balaji pays no output tax, but ITC of Rs. 5,40,000 on trucks and Rs. 1,44,000 on repairs, total Rs. 6,84,000, is lost.

Option B (18%, forward charge): output tax = Rs. 18,00,000. Less ITC Rs. 6,84,000. Cash payable = Rs. 11,16,000. Customers take credit of Rs. 18,00,000.

Step 1: For fully taxable customers the tax is neutral in both options.

Result: option B saves Balaji Rs. 6,84,000 of cost in a year of heavy capital spending. If Balaji carried goods for exempt or unregistered customers, option A would be cheaper for them, and the choice would change. The declaration must be filed by 31 March for the next year.

31.4 Multimodal, courier, air cargo and ocean freight

Multimodal transport follows the GTA pattern: 5% without ITC or 18% with ITC. Courier services are 18%. The exemption for export freight by air and sea lapsed after 30 September 2022, and with the omission of section 13(9) of the IGST Act from 1 October 2023 the place of supply of goods transport services now follows the location of the recipient. Reverse charge IGST on ocean freight in CIF imports was struck down.

Judicial view: Ocean freight on CIF imports

Union of India v. Mohit Minerals (P) Ltd. (Supreme Court, 2022): recommendations of the GST Council are persuasive and not binding on Parliament and the States. On the merits, IGST under reverse charge on ocean freight in CIF imports was struck down, because the transport service is part of the composite supply of goods on which the importer already pays IGST at customs; taxing it separately offends section 8 of the CGST Act. The reverse charge entry was omitted from 1 October 2023. Importers who paid tax earlier may have refund claims subject to limitation.

Chapter summary

• Hotel rooms up to Rs. 7,500 per day: 5% without ITC; above: 18% with ITC.

• Restaurants and outdoor catering: 5% without ITC; at or from specified premises: 18% with ITC.

• Tour operators: 5% without ITC; passenger transport by road: 5% or 18% with ITC; air: 5% economy, 18% others.

• GTA and multimodal transport: 5% without ITC (reverse charge for specified recipients) or 18% with ITC by declaration before 31 March.

• No separate IGST on ocean freight in CIF imports after Mohit Minerals.