GST & Hospitality Sector: Specified Premises Explained

 Background, Online Opt-In Process, and Key Benefits

The GST framework for hotel accommodation services has undergone a significant procedural refinement with the introduction of an online opt-in mechanism for declaring “Specified Premises” on the GST Portal. While the concept itself was notified earlier, the availability of a system-driven filing process from FY 2026–27 marks an important step toward classification certainty and litigation reduction for the hospitality sector.

This article explains why the amendment was introduced, how the new online process works, and what practical benefits it offers to hotel and accommodation service providers.

Background: Why the Concept of “Specified Premises” Was Introduced

Vide Notification No. 05/2025 – Central Tax (Rate) dated 16 January 2025, the Government formally introduced the concept of “Specified Premises” for hotel accommodation services. The classification is relevant for determining the applicable GST rate, particularly for higher-value or premium accommodation offerings.

However, during FY 2025–26, there was a major operational gap:

• No electronic facility was available on the GST Portal
• Declarations were filed manually with jurisdictional officers
• Records were fragmented, non-standardised, and difficult to verify during audits

This led to uncertainty, especially during scrutiny proceedings, where taxpayers were required to justify both rate applied and eligibility retrospectively.

To address these issues and align the process with GST’s digital compliance philosophy, the Government has now enabled online filing of opt-in declarations for specified premises, effective from January 2026 for FY 2026–27 onwards.

Who Can Opt for Specified Premises Declaration

The online facility is available to:

• Existing registered regular taxpayers (including suspended registrations) supplying hotel accommodation services
• Applicants for new GST registration intending to supply such services

The facility is not available to:

• Composition taxpayers
• TDS/TCS registrants
• SEZ units or developers
• Casual taxpayers
• Cancelled registrations

Types of Declarations Available on the GST Portal

The GST Portal now hosts the following declarations:

Annexure VII

For existing registered taxpayers opting to declare premises as specified premises for a subsequent financial year.

Annexure VIII

For persons applying for new GST registration, to declare specified premises from the effective date of registration.

(Annexure IX for opt-out will be introduced separately.)

Timeline for Filing the Declarations

Existing Registered Taxpayers – Annexure VII

• Filing window: 1 January to 31 March of the preceding financial year
• For FY 2026–27, the window is 01.01.2026 to 31.03.2026

New Registration Applicants – Annexure VIII

• Must be filed within 15 days from the date of ARN generation
• Filing is allowed even before GSTIN allotment, provided the application is not rejected
• If the 15-day window lapses, the declaration can only be filed during the January–March window via Annexure VII

Mandatory Re-Filing for FY 2026–27

A critical compliance point:

• For FY 2025–26, declarations were filed manually
• For FY 2026–27, fresh electronic filing of Annexure VII is mandatory, even for taxpayers who had already declared specified premises earlier

Similarly, taxpayers declaring specified premises for the first time must also file Annexure VII during the same window.

Key Benefits of Declaring “Specified Premises”

1. Certainty of GST Rate Applicability

The foremost benefit is classification and rate certainty. Once premises are declared as specified:

• The applicable GST rate becomes clear and defensible
• Ambiguity arising from tariff fluctuations or dynamic pricing is substantially reduced

In GST, certainty often outweighs marginal rate differences.

2. Stronger Defence During Audit and Scrutiny

An electronically filed declaration:

• Is system-validated
• Generates an ARN
• Creates a permanent digital audit trail

This significantly strengthens the taxpayer’s position during:

• Departmental audits
• Scrutiny of returns
• Investigations by enforcement authorities

3. Reduced Risk of Reclassification and Litigation

Without a formal declaration, accommodation services are vulnerable to post-facto reclassification, leading to:

• Differential tax demands
• Interest and penalty exposure

Specified premises status narrows the scope for subjective interpretation, thereby reducing litigation risk.

4. Business and Pricing Stability

Once exercised, the option:

• Continues for subsequent financial years
• Requires no annual reassessment unless an opt-out is filed

This enables:

• Stable pricing policies
• Long-term corporate contracts
• Avoidance of mid-year GST surprises

5. Premise-Wise Flexibility for Multi-Property Operators

For hotel groups and entities with multiple properties:

• Declarations are premise-specific, not entity-wide
• Each premise receives a separate reference number
• Classification of one property does not impact others

This ensures clean segregation and clarity.

6. Enhanced Credibility with Corporate Clients and OTAs

Many corporate clients and travel aggregators insist on:

• Correct GST invoicing
• Rate certainty
• Clean compliance history

Specified premises declaration improves:

• Trust
• Onboarding efficiency
• Reduction in invoice disputes

7. Alignment with GST’s Digital Compliance Direction

The shift from manual to online declarations reflects a clear policy direction:

If it is not on the portal, it effectively does not exist.

Early alignment with portal-based declarations helps taxpayers stay prepared for:

• Data-driven scrutiny
• Automated notices
• System-based compliance checks

What Declaring Specified Premises Does Not Do

For clarity:

• It does not automatically reduce GST liability
• It does not grant exemptions or concessions
• It does not override tariff-based rate rules

Its value lies in certainty, defensibility, and risk management, not tax arbitrage.

Conclusion

Declaring “Specified Premises” under GST is no longer a mere procedural formality. It is a strategic compliance decision for hospitality businesses, particularly those operating in higher tariff segments.

With the online facility now available, taxpayers have an opportunity to:

• Lock in classification
• Strengthen audit defence
• Minimise future disputes

In a tax regime where disputes often arise from interpretational ambiguity rather than evasion, a clear, system-backed declaration today can prevent years of avoidable litigation tomorrow.

In GST, what you formally declare matters as much as what you earn.

 

GST 56th Council Meeting: What It Means for the Garment & Textile Industry

The 56th meeting of the GST Council has ushered in one of the most significant structural changes to India’s indirect tax system. For the garment and textile sector—a labour-intensive industry with strong export potential—these reforms are particularly noteworthy. The new rate structure aims to resolve long-standing issues, simplify compliance, and enhance competitiveness.

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Simplification of Rate Structure

Earlier, garments were taxed under a dual-rate system:

• 5% GST for items priced up to ₹1,000 per piece
• 12% GST for items priced above ₹1,000 per piece

This structure not only created confusion but also led to classification disputes and compliance hurdles. The 56th GST Council Meeting has now collapsed this into a cleaner framework aligned with the broader two-rate GST structure (5% Merit, 18% Standard).

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Comparative Chart: Old vs New GST Rates on Garments

Category	Earlier GST Rate	New GST Rate (Post 56th Council)	Remarks
Apparel/garments (value ≤ ₹1,000 per piece)	5%	5% (Merit rate)	Retained for affordability; no change.
Apparel/garments (value > ₹1,000 but ≤ ₹2,500 per piece)	12%	5% (Merit rate)	Significant relief; shifted to lower slab.
Apparel/garments (value > ₹2,500 per piece)	12%	18% (Standard rate)	Aligned with standard GST slab for premium apparel.
Handloom, handmade & embroidered shawls, handicraft textiles	Varied (5–12%)	5%	Consolidated under merit rate to support artisans/MSMEs.
Manmade fibre	18%	5%	Correction of inverted duty structure.
Manmade yarn	12%	5%	Correction of inverted duty structure.

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Key Implications for the Industry

1. Removal of Inverted Duty Structure
• Manmade fibre and yarn brought down to 5%.
• This resolves a major working capital issue and reduces refund dependencies across the textile value chain.
2. Consumer Benefit on Mid-Range Apparel
• Garments between ₹1,000–₹2,500 now taxed at 5% instead of 12%.
• Middle-income consumers will see reduced prices, potentially boosting demand.
3. Premium Apparel Under Standard Rate
• Garments above ₹2,500 per piece now fall under 18%.
• This aligns luxury/premium apparel with the broader standard rate, ensuring clarity and uniformity.
4. Support for Artisans and MSMEs
• Handloom, embroidery, and handicraft textiles consolidated under 5%.
• This directly supports employment and rural livelihood.
5. Boost to Competitiveness
• With input costs rationalised, Indian garments and textiles are better positioned to compete globally, especially in export markets.

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Conclusion

The GST Council’s latest decisions mark a watershed moment for the garment and textile industry. By addressing inverted duty structures, rationalising garment rates, and supporting artisans, the reforms strike a balance between affordability, industrial growth, and revenue needs. The simplified rate framework is expected to reduce disputes, lower compliance costs, and provide a much-needed boost to both domestic consumption and exports.

 

GST Rate Cuts on Cars: What Car Dealers Need to Know

The GST Council’s 56th meeting has brought in one of the most significant tax rationalisation measures for the automobile sector since the rollout of GST. With effect from 22nd September 2025, the new rates are aimed at simplifying the tax structure, removing the cess burden, and rationalising costs for both dealers and buyers.

For car dealers, these changes have direct implications on pricing, margins, inventory, and customer communication.

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1. Revised GST Rates for Cars

The Council has restructured the rates across categories:

• Small Cars (Petrol/LPG/CNG up to 1200 cc & length ≤ 4000 mm; Diesel up to 1500 cc & length ≤ 4000 mm)

  • Earlier: 28%

  • Now: 18%

• Mid-Size and Large Cars (engine >1500 cc or length >4000 mm)

  • Earlier: 28% + Compensation Cess (17–22%) → effective 45–50%

  • Now: 40% flat GST (no cess)

• Utility Vehicles (SUVs, MUVs, MPVs, Crossovers, XUVs)

  • Conditions: engine >1500 cc, length >4000 mm, ground clearance ≥170 mm

  • Earlier: 28% + cess (~45–50%)

  • Now: 40% flat GST (no cess)

• Three-Wheelers (HSN 8703)

  • Reduced from 28% → 18%

• Buses and Passenger Vehicles (≥10 persons)

  • Reduced from 28% → 18%

• Ambulances

  • Reduced from 28% → 18%

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2. Impact on Car Dealers

a) Price Positioning & Sales Push

• Small cars become more attractive due to the tax reduction to 18%. Dealers can expect increased demand in the budget segment.

• Luxury cars and SUVs now face a flat 40% GST. While still high, the removal of compensation cess simplifies pricing and improves transparency for buyers.

b) Inventory Management

• Cars in stock before 21st September 2025 but sold after the new rates will attract revised GST as per time-of-supply rules. Dealers must carefully manage billing to avoid disputes.

c) Customer Communication

• Dealers should actively highlight the price reduction in small cars as a sales driver.

• For large cars/SUVs, while the effective tax incidence remains similar (~40–50%), the messaging can focus on simplified pricing without cess.

d) ITC & Margins

• Input Tax Credit (ITC) mechanisms remain unchanged. Dealers must ensure smooth reconciliation of ITC during the transition phase.

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3. Strategic Opportunities

• Promotions & Campaigns: Leverage the GST cut on small cars to run special festive offers or exchange schemes.

• Dealer Finance Planning: Lower GST on buses, three-wheelers, and ambulances may open cross-segment business opportunities.

• Transparency in High-End Cars: The move to a flat 40% GST without cess reduces complexity and can be pitched as a “simplified tax regime” to premium buyers.

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4. Key Compliance Points

• Apply new rates on supplies made from 22nd September 2025 onwards, regardless of booking date.

• Ensure correct invoicing under Section 14 of CGST Act, 2017 for transactions straddling the date of change.

• E-way bills already generated remain valid; no need for cancellation/reissue due to rate change.

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Conclusion

The GST reforms are a mixed bag for car dealers—with small cars getting a tax boost that may drive higher volumes, and large cars/SUVs settling into a simplified but still heavy tax slab of 40%.

Dealers should focus on:

• Promoting affordability in the small car segment.

• Positioning premium cars with simplified tax transparency.

• Re-aligning inventory, contracts, and customer outreach to capture the benefits of the new tax regime.

Overall, these changes are expected to invigorate demand in the mass market segment while bringing greater clarity to the premium category.

GST Rate Changes: Key Takeaways for GTA Service Providers and Transporters

The GST Council, in its 56th meeting, recommended a wide-ranging rate rationalisation exercise with effect   from  22nd  September  2025.  These  changes  impact  multiple  sectors,  including  goods transportation. For Goods Transport Agency (GTA) service providers and transport operators, the revised rates bring both opportunities and challenges, depending on their business structure, cost base, and compliance strategy.

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1. GST Framework for GTA Services

A GTA is defined under GST as any person who provides service in relation to the transport of goods by road and issues a consignment note. The taxability of GTA services has been an area of continuous discussion since the inception of GST.

Under the revised framework, GTA services will continue to be taxed at:

• 5% GST (without Input Tax Credit – ITC) – default merit rate.

• 18% GST (with full ITC) – optional, if the GTA chooses to avail ITC.

This dual rate structure provides flexibility but requires businesses to carefully evaluate their input tax profile and decide which option reduces their overall cost burden.

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2. No Blanket Exemption for GTA Services

The industry had been anticipating a complete exemption for GTA services, given their critical role in logistics and supply chain. However, the GST Council clarified that a full exemption would block ITC in the value chain and increase the effective cost of transportation.

Specific exemptions, however, remain available for GTA services involving essential commodities such as:

• Agricultural produce

• Milk

• Food grains

• Certain notified essential items (B2C supplies)

This targeted approach ensures affordability for essential goods while retaining credit flow in the larger business-to-business (B2B) logistics sector.

3. GST Rates for Other Transporters

Apart from GTAs, the rate rationalisation also covers other categories of transport service providers:

a) Container Train Operators (CTOs)

• Option of 5% GST without ITC or 18% GST with ITC.

b) Multimodal Transporters

• 5% GST (restricted ITC) if no air transport is involved.

• 18% GST (with ITC) if transportation by air is part of the multimodal movement.

c) Goods Transport Vehicles (Trucks, Lorries, etc.)

• Supply of goods transport vehicles (classified under HSN 8704) will now attract 18% GST (reduced from 28%).

• This change is expected to lower the fleet acquisition cost, improving liquidity for transporters and fleet operators. 

4. Transition Rules and Compliance

The GST Council has also addressed transitional issues linked to the effective date of rate change:

• Time of Supply rules under Section 14 of the CGST Act, 2017 will determine applicable rates where services are supplied before 22nd September 2025, but invoicing or payment occurs later.

• Input Tax Credit (ITC) availed prior to the change remains valid and can be utilised. However, if supplies become exempt post rate change, ITC will need to be reversed.

• E-way bills already generated will not need to be cancelled or reissued merely due to a rate change. 

5. Practical Implications for Businesses

For GTA Service Providers

• Evaluate whether to continue with 5% (no ITC) or opt for 18% (with ITC).

• Businesses with significant input costs (vehicles, spares, services) may benefit by switching to 18% with ITC.

For Fleet Operators / Transporters

• Lower acquisition cost of trucks and lorries (18% instead of 28%) reduces capital outflow.

• CTOs and multimodal operators gain flexibility similar to GTAs.

For Consignors / Consignees (Clients of GTA)

• Need to review contracts and determine who bears the GST burden under forward charge or reverse charge mechanism.

• Must account for the impact of time of supply provisions on contracts straddling the effective date.

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6. Strategic Considerations

• Cost Optimisation: Conduct a cost-benefit analysis of ITC versus non-ITC options.

• Contract Structuring: Ensure clarity on GST liability clauses, especially for long-term contracts.

• Compliance Management: Maintain updated systems for invoicing, e-way bills, and ITC reconciliations to avoid disputes.

• Client Communication: Proactively inform customers about rate changes and revised invoicing methodology.

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Conclusion

The GST Council’s latest reforms provide greater flexibility for GTA and transport service providers while ensuring credit flow in the supply chain. The reduction of GST on trucks and lorries will directly benefit fleet operators, while the continued dual-rate mechanism for GTA and CTO services allows businesses to align tax choices with their operational needs.

Overall, these changes are expected to rationalise costs, reduce disputes, and bring better clarity to the logistics sector—one of the most critical enablers of economic activity.

Simplified, Citizen-Centric GST: Key Decisions from the 56th GST Council

The 56th meeting of   the  GST  Council, chaired by Union  Finance Minister Smt. Nirmala Sitharaman, has  introduced a  series   of  landmark  reforms aimed at simplifying  the  tax  regime  and reducing the burden on citizens. The Council approved the rationalisation of the GST structure into just two principal rates—18% (Standard) and 5% (Merit)—along with a special demerit rate of 40% for select goods. This simplification is expected to ease compliance, improve transparency, and strengthen India’s tax ecosystem.

In a major relief to households, GST has been fully exempted on all life and health insurance policies, as well as on 33 life-saving drugs and several critical medical devices. Essential commodities such as Indian breads, UHT milk, paneer, soaps, shampoos, bicycles, and kitchenware have seen substantial reductions, while packaged foods like namkeens, noodles, chocolates, and coffee now fall under the 5% rate. Cement, small cars, and motorcycles have also been moved to the 18% slab, easing costs for both consumers and industries.

To strengthen trade facilitation, the Goods and Services Tax Appellate Tribunal (GSTAT) will become operational by September 2025, ensuring faster dispute resolution and greater consistency in rulings. With phased implementation beginning on 22nd September 2025, these reforms reflect the government’s commitment to building a simpler, more inclusive, and growth-oriented GST framework.

The 56th meeting of the Goods and Services Tax (GST) Council, has paved the way for what is being termed as next-generation GST reforms. These changes, in line with Prime Minister Shri Narendra Modi’s Independence Day address, are designed to create a simplified, equitable, and citizen-centric tax framework that balances fiscal responsibility with ease of doing business.

Simplification of GST Rate Structure

A major structural reform has been announced with the rationalisation of the existing four-tier rate system into two principal slabs:

• Standard Rate: 18%
• Merit Rate: 5%
• With a special demerit rate of 40% on select goods and services.

This transition to a simplified framework is expected to enhance compliance, reduce classification disputes, and provide greater clarity to taxpayers.

Relief Measures for Citizens

The Council has placed strong emphasis on reducing the tax burden on essential goods and services:

• Insurance: All life and health insurance policies, including ULIPs, family floaters, and senior citizen plans, have been exempted from GST, making insurance more affordable and accessible.
• Healthcare: Over 33 life-saving drugs and critical medical equipment have been moved to the NIL or 5% bracket, significantly lowering healthcare costs.
• Essential commodities: Household products such as soaps, shampoos, bicycles, and kitchenware will now attract only 5% GST. Indian breads (chapati, roti, paratha, parotta) and UHT milk have been exempted entirely.
• Packaged foods: Rates on widely consumed packaged items including namkeens, noodles, chocolates, coffee, and ghee have been reduced to 5%.

Support for Key Sectors

To strengthen employment-intensive and growth-critical sectors, the following changes were approved:

• Agriculture: Tractors, soil preparation and harvesting machinery, and composting equipment reduced from 12% to 5%.
• Infrastructure: Cement moved from 28% to 18%, providing a fillip to construction and housing.
• Automobiles: Small cars, motorcycles (≤350cc), and TVs up to 32 inches have been brought under the 18% slab.
• Renewables: Devices and parts used in renewable energy projects reduced to 5%.
• Labour-intensive sectors: Handicrafts, marble, granite blocks, and intermediate leather goods shifted to the 5% rate.

Trade Facilitation and Dispute Resolution

The Council has also prioritised institutional strengthening:

• The Goods and Services Tax Appellate Tribunal (GSTAT) will be operational by September 2025, with hearings commencing before December. This will provide an efficient platform for dispute resolution and enhance consistency in advance rulings.
• Process reforms aimed at reducing compliance burden and litigation will be rolled out in phases.

Implementation Timeline

Most rate changes will come into effect from 22nd September 2025, with certain categories—particularly tobacco products—retaining existing rates until cess obligations are discharged.

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Source:  Recommendations of the 56th Meeting of the GST Council held at New Delhi, on 03 Sept., 2025, posted on 03 Sep. 2025 10:39 PM by PIB Delhi.