For a hotel or restaurant in India, an input tax credit (ITC) claim starts with the outward supply, not the purchase invoice. Ordinary restaurant service outside specified premises is listed at 5% with a condition that ITC on goods and services used to provide that service is not taken. Restaurant service at specified premises is listed under an 18% entry. You must then test each inward supply against the cumulative conditions in section 16 of the Central Goods and Services Tax Act, 2017, the blocked-credit rules in section 17(5), payment and return requirements, and the applicable time limit.
Use the checklist below invoice by invoice. Treat the rate and specified-premises analysis as period-specific: notifications, declarations and procedural rules can change, and a press release is not a substitute for the operative notification.
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1. Map your registrations and outward supplies first
Identify the GST registration and legal entity that received each purchase and will claim the credit. A group may operate a hotel, restaurant, banquet business and central kitchen under different registrations or premises; an invoice issued to the wrong GSTIN cannot simply be moved into another entity’s credit ledger.
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- Restaurant service outside specified premises.
- Restaurant service at specified premises.
- Hotel accommodation and related taxable services.
- Outdoor catering, banquets and event food service.
- Other taxable business activities.
- Exempt or non-business activities.
Make the classification for the relevant tax period, then map purchases to each line. The same kitchen, building or vehicle may support several supplies, so a full-credit claim on every common cost can overstate entitlement.
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Check the specified-premises rule for the period
CBIC’s 55th GST Council press release (21 December 2024) describes a specified-premises approach linked to the value of accommodation supplied in the preceding financial year and an option to pay 18% with ITC by declaration. The official rate framework also references a ₹7,500 amount. These statements describe the policy and rate structure; they do not replace the notification and declaration procedure in force for your period. Obtain the operative notification, confirm the preceding-year accommodation value, and retain the declaration or other evidence required for the premises.
Apply the restaurant rate entry carefully
| Outward supply or activity | What the official framework says | ITC consequence to screen |
|---|---|---|
| Restaurant service other than at specified premises | Listed at 5%. | The entry is subject to not taking credit on goods and services used to supply that service. |
| Restaurant service at specified premises | Falls under the 18% entry. | Test normal section 16 conditions and all section 17 restrictions; do not assume every cost is creditable. |
| Cloud or central kitchen cooking and supply of food | CBIC Circular 164/20/2021-GST (6 October 2021) clarifies that this is restaurant service under the referenced 5% entry. | Credit on goods and services used for that service is not available under the entry’s condition. |
| Hotel accommodation, outdoor catering and other activities | The applicable treatment depends on the operative rate entry, premises facts and period. | Classify the outward supply and then test section 16, section 17(5), allocation and payment rules. |
Do not use a generic room-tariff or menu description as a permanent specified-premises test. The relevant preceding financial year, notification wording and any valid election control.
2. Test each inward supply against the section 16 conditions
Section 16(1) states: “Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.” The entitlement is conditional, not automatic.
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Invoice-level eligibility checklist
- Correct recipient: Confirm that the recipient is registered, the invoice shows that GSTIN and the legal entity actually received or is entitled to receive the supply.
- Business purpose: Document how the goods or services are used, or intended to be used, in the course or furtherance of business.
- Receipt: Keep delivery records, service completion evidence, goods-received notes or other proof that the supply was received. Where goods are delivered to another person on your direction, document that statutory delivery arrangement.
- Lots or instalments: If goods arrive in lots, entitlement arises on receipt of the last lot. Track the final delivery rather than claiming when only the first shipment arrives.
- Prescribed document: Retain a qualifying tax invoice, debit note, bill of entry or other prescribed document with the required particulars. A quotation, pro-forma invoice or incomplete document is not a substitute.
- Tax payment and return: Check the applicable supplier-tax and return conditions before finalising the claim. Reconcile purchase records with supplier-uploaded details and the currently applicable portal forms and rules.
- No duplicate depreciation: If the GST component of capital goods is included in the depreciable cost under income-tax rules, do not claim ITC on that same tax component.
Separate business and non-business use
When an input serves both business and another purpose, claim only the business-use portion. For example, a vehicle used for guest transfers and an owner’s private travel needs a documented allocation; claiming all tax because the vehicle is registered to the hotel is not enough. Use a reasonable, consistently applied basis supported by trip logs, floor plans, usage reports or other contemporaneous records.
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Apportion taxable and exempt use
Common inputs used for taxable and exempt outward supplies require apportionment under the applicable rules. A central utility contract, building repair or administration service may support taxable rooms, exempt activity and non-business use at once. Keep the calculation, inputs and revision trail with the return working papers.
3. Screen blocked credits before you post them
Section 17(5) blocks specified categories even when an invoice is valid and the purchase is used in a business. Food and beverages and outdoor catering are expressly listed categories, along with personal consumption and other enumerated items. The statutory exception is narrow: it can apply where the inward category is used to make an outward taxable supply of the same category, or as an element of a taxable composite or mixed supply, in the circumstances set out by the law.
Questions for food, catering and guest-related costs
- Is the purchase food or beverage consumed by staff, owners or guests, rather than resold or incorporated into a taxable supply?
- Is it an outdoor-catering service, and does the statutory same-category or composite/mixed-supply exception actually fit the outward transaction?
- Is the restaurant output on the 5% entry that expressly prohibits ITC on inputs used to provide it?
- Does a hotel package combine accommodation, meals, events or transport, requiring analysis of the composite or mixed supply rather than a single invoice label?
- Is the expense personal consumption or otherwise within a specifically blocked category?
Do not treat “business expense” as a synonym for “creditable input.” Record the legal reason for allowing, restricting or blocking each category.
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The 180-day payment test
If you do not pay the supplier the value plus tax within 180 days from the invoice date, the credit attributable to the unpaid amount is subject to reversal with applicable interest under the prescribed process. Track the unpaid proportion, not just the existence of a part-payment. After payment is made, the credit may be re-availed as permitted by the rules.
Reverse-charge exception
The 180-day payment condition does not apply to supplies on which tax is payable under reverse charge, according to CBIC’s Sectoral FAQs. Reverse-charge transactions still need a valid document, receipt, business-use analysis, tax payment and all other applicable ITC conditions.
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- Invoice number, supplier GSTIN, invoice date and tax amount.
- Due date at 180 days and the amount paid by that date.
- Bank statement, payment advice or other evidence of settlement.
- Reversal journal, interest computation and return period if the threshold is missed.
- Date and return period of re-availment after payment.
- Separate flag for reverse-charge invoices.
5. Control the section 16(4) time limit
The general cut-off for claiming an invoice or debit-note credit is 30 November following the end of the relevant financial year, or the date of filing the relevant annual return, whichever is earlier. Put both events on the compliance calendar; filing an annual return early can bring the effective deadline forward.
Review retrospective relief separately
Circular 237/31/2024-GST (15 October 2024) describes retrospective relief for specified older-period cases. That relief is not a general extension for every late invoice. Identify the exact period and fact pattern covered, read the operative circular and notification, and retain the evidence supporting the exception before relying on it.
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- Close the purchase register for the tax period.
- Match invoices, debit notes and bills of entry to receipt evidence and supplier data.
- Classify each item by outward supply, blocked category and allocation percentage.
- Calculate 180-day payment exposures and reversals.
- Check cumulative financial-year credit against the 30 November or annual-return deadline.
- Have a preparer and reviewer sign off unusual premises, catering, capital-goods and retrospective-relief positions.
6. Keep an audit-ready evidence file
Store the records supporting the decision together rather than scattering them across procurement, accounts payable and tax folders. A practical file for each material category should contain:
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- The invoice, debit note, bill of entry or other eligible document.
- Purchase order, contract, work order and proof of receipt.
- A short business-purpose note linking the input to the outward supply.
- Premises classification, rate-entry analysis and any declaration.
- Blocked-credit screening under section 17(5).
- Business/non-business and taxable/exempt allocation workings.
- Supplier reconciliation and return data used for the claim.
- Payment proof, 180-day reversal and later re-availment records.
- Capital-goods depreciation check.
- Reviewer approval and the tax period to which the conclusion applies.
This file is an operational way to demonstrate the statutory conditions; the exact record prescribed by law can vary by transaction and rule.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.7. Fast decision matrix for common hotel and restaurant scenarios
| Scenario | First question | Likely control |
|---|---|---|
| Groceries and ingredients for a restaurant outside specified premises | Is the output the 5% restaurant service entry? | If yes, the entry condition prohibits ITC on goods and services used to supply that service. |
| Food prepared in a central kitchen and delivered to outlets | Does Circular 164/20/2021-GST classification apply to the period and facts? | Cooking and supply of food is treated as restaurant service under the referenced 5% entry, with no ITC on inputs used for it. |
| Restaurant at premises qualifying under the operative specified-premises rule | Was the preceding-year accommodation value and declaration requirement met? | The 18% entry applies; then test section 16, section 17(5), allocation and payment. |
| Outdoor catering for an event | Is the category blocked, and does the statutory exception fit the actual taxable outward supply? | Do not claim by default; document the exception if it genuinely applies. |
| Common hotel building repair | Which taxable, exempt and non-business activities use the premises? | Allocate the credit and retain the calculation. |
| Invoice unpaid for more than 180 days | Is it a reverse-charge supply? | For forward-charge supplies, reverse the unpaid proportion with applicable interest; re-avail after payment as permitted. Reverse-charge supplies are outside this 180-day condition. |
8. When to obtain fact-specific advice
Escalate before filing when premises status changes during the year, an accommodation threshold is close to the specified-premises boundary, a declaration was missed or amended, one kitchen serves outputs with different rate entries, a package may be composite or mixed, an invoice names another GSTIN, goods were delivered to a third party, or a retrospective exception is being considered. Ask the adviser to identify the exact notification, period, outward-supply entry and statutory provision supporting the conclusion.
FAQ
Can a person take input tax credit without payment of consideration for the supply along with tax to the supplier?
For a forward-charge supply, failure to pay the supplier the value plus tax within 180 days requires reversal of the credit attributable to the unpaid amount, with applicable interest under the prescribed process. Credit may be re-availed after payment as permitted. The 180-day condition does not apply to reverse-charge supplies, but the other eligibility conditions still do.
Does a valid GST invoice guarantee credit for a restaurant?
No. The outward rate entry may prohibit ITC, section 17(5) may block the category, and business-use, receipt, supplier-tax, return, allocation, payment and time-limit conditions still apply.
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Is the ₹7,500 figure by itself enough to decide specified-premises status?
No. Apply the notification in force for the relevant period, including the preceding-financial-year accommodation test and any declaration process. The figure is part of the official rate framework, not a standalone shortcut.
Frequently Asked Questions
Can a person take input tax credit without payment of consideration for the supply along with tax to the supplier?
For a forward-charge supply, unpaid value plus tax after 180 days requires reversal of the attributable credit with applicable interest; re-availment is permitted after payment. The 180-day condition does not apply to reverse-charge supplies.
Does a valid GST invoice guarantee credit for a restaurant?
No. The outward rate entry, blocked-credit rules, business-use, receipt, tax-payment, return, allocation, payment and time-limit conditions must all be satisfied.
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Is the ₹7,500 figure by itself enough to decide specified-premises status?
No. Check the notification for the relevant period, the preceding-year accommodation test and any required declaration.
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