What Is a ‘Specified Premises’ Restaurant, and Why Does It Charge 18%?
GSTZone Desk · Updated 2026
Short answer
A ‘specified premises’ is a hotel where the value of any unit of accommodation crossed ₹7,500 per day in the preceding financial year (or the hotel has opted in for the current year) — and any restaurant located inside such a hotel must charge 18% GST with ITC, instead of the standard standalone-restaurant rate of 5% without ITC.
In detail
This classification exists because a restaurant’s GST rate isn’t decided in isolation — it’s tied to the hotel establishment it sits inside, if any. A hotel that crossed the ₹7,500-per-day room-tariff threshold in the previous year gets classified as ‘specified premises’ for the current year, and that status then dictates the rate for its in-house restaurant too, regardless of what that specific restaurant charges for its meals.
This is why you might see a hotel’s restaurant charging 18% even on a modest ₹500 meal — it isn’t the food’s own price driving the rate; it’s the hotel’s own room-tariff history from the previous financial year.
In exchange for the higher 18% rate, the restaurant (and the hotel generally) gets to claim input tax credit on its costs — a trade-off, not a pure penalty, consistent with the same 5%-no-ITC versus 18%-with-ITC logic that runs through both the hotel room and restaurant rate structure.
GSTZone tip
If you run a hotel restaurant and aren’t sure which rate applies, check your own hotel’s room-tariff data from the PREVIOUS financial year, not the current one — the specified-premises classification is set annually based on that prior year’s numbers, not real-time room pricing.
Related questions
Can a hotel below the threshold still opt into specified-premises status voluntarily?+
Yes — a hotel can choose to opt in even if it hasn’t crossed the threshold, generally to access the ITC benefit on the 18% rate, though this is a deliberate choice with its own filing process.
Does this affect banquet and event catering by the same hotel?+
Yes, generally — outdoor catering and banquet services provided by a hotel classified as specified premises typically follow the same 18%-with-ITC treatment as its restaurant.
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