Bombay HC Stays 18% GST Levy on Restaurants Operating Within Hotels

In a recent ruling, the Bombay High Court granted an interim stay on the 18% Goods and Services Tax (GST) levied on restaurants operating inside hotels classified as “specified premises,” which charge more than Rs. 7,500 per room per night.

The petitioners’ counsel, Abhishek A Rastogi argued that the distinction between restaurants inside such hotels being taxed at 18% with Input Tax Credit (ITC) and standalone restaurants being taxed at 5% without ITC was arbitrary, irrational, and commercially unjustified.

The case was heard by the Aurangabad Bench of the Bombay High Court. The bench comprising Justice R. G. Avachat and Justice Abasaheb D. Shinde observed that notices had been issued to the Union of India, the State of Maharashtra, the GST Council, and other concerned authorities, seeking their responses to the petition.

The petitioners’ counsel explained that many hotel-based restaurants also serve walk-in customers who are not hotel guests, and yet, the higher 18% GST rate is applied solely based on the restaurant’s location within the hotel premises.

They pointed out that even mid-range hotels may temporarily raise room tariffs during festive seasons or holidays, which can inadvertently place them under the higher GST bracket.

The petitioners’ counsel further argued that the GST Council never intended such an outcome and that restaurant services should be taxed based on the nature of the service provided, not on the location of the establishment.

The matter will be heard next on November 19. The interim stay will continue until further orders.

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