Dear Sir, One of our client has started construction of a hotel on its owned land and planned to commence the commercial operations of hotel. Where the room rent proposed to be charged by hotel will 3500 to 10000 which attract GST at 12% or 18%. Whether Input Tax Credit on goods and services used in construction of hotel will be available to the applicant ?

Reply—Rate of tax on accommodation service to be determined on the basis of actual value of service and not declared tariff.

The rate of GST on Hotel accommodation service is as follows: –

Transaction value per unit (Rs) per day Rs 1000 and less - Nil

Transaction value per unit (Rs) per day Rs 1001 to Rs 7500 - 12% with ITC

Transaction value per unit (Rs) per day Rs 7501 and more. - 18% with ITC

(refer notification 20/2019 central tax rate dated 30.09.2020)

Hotelier can claim ITC on all goods and services except those which are blocked u/s 17(5) of CGST Act, 2017. Under section 17(5)(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business are also not eligible for input tax credit. Input tax credit in general is not available for construction, reconstruction, renovation, addition, alteration or repair of an immovable property even when such goods or services or both are used in course or furtherance of business.

ITC is allowed according to the Judgment of the Hon’ble High Court of Orissa in the matter of Safari Retreats Private Limited Versus Chief Commissioner of CGST dated 17.04.2019. The High Court has answered the question raised by the appellant but has not specifically distinguished, (declared) section 17(5) (d) to be ultra-virus to the CGST Act and hence it will be risky to avail the credit of immovable property on the basis of the above Judgment.

Department has preferred an appeal before the Supreme Court.