Can We Claim Input GST on Hotel Bills?

If you are a business owner, it is essential to understand how to claim Input Tax Credit (ITC) on GST paid for various expenses. One such expense is the payment of hotel bills. Can you claim input GST on hotel bills? In this article, we will delve into this topic and provide you with all the necessary information you need to know.

Understanding Input Tax Credit (ITC)

Input Tax Credit (ITC) is a mechanism of availing credit for the GST paid on purchases made for business purposes. It allows businesses to reduce their tax liability by claiming the GST paid on purchases as a credit against the GST collected on sales. In simple terms, ITC is the credit that a registered person can claim for the GST paid on goods or services used for business purposes.

GST Applicability on Hotel Bills

As per the GST laws, hotels are considered as ‘services’ and are subject to GST. GST on hotel bills is charged at different rates based on the room tariff and other services availed by the customer. The GST rates applicable on hotel bills are as follows:

• 0% for hotels with a tariff of up to Rs. 1,000 per day or equivalent
• 12% for hotels with a tariff of more than Rs. 1,000 per day but less than Rs. 2,500 per day or equivalent
• 18% for hotels with a tariff of Rs. 2,500 or more per day or equivalent

Conditions for claiming ITC on Hotel Bills

To claim ITC on hotel bills, the following conditions must be satisfied:

1. The Hotel Bill should be in the name of the Business

The hotel bill should be in the name of the registered business, and the business must have paid for the bill.

2. The Hotel Bill should contain GSTIN of the Business

The hotel bill should contain the GSTIN (Goods and Services Tax Identification Number) of the business. It is essential to ensure that the GSTIN mentioned on the hotel bill matches the GSTIN of the business.

3. The Hotel Bill should be for Business Purpose

The hotel bill should be for business purposes, such as attending a conference, meeting clients, or any other business-related activity.

4. The Hotel Bill should be Paid through a Bank Account or Digital Mode

To claim ITC on hotel bills, the payment must be made through a bank account or digital mode such as credit/debit card, net banking, UPI, etc. Cash payments are not eligible for ITC.

Exceptions where ITC cannot be claimed on Hotel Bills

There are some exceptions where ITC cannot be claimed on hotel bills. These include:

1. Use of Hotel for Personal Purposes

If the hotel room is used for personal purposes or for the accommodation of employees, ITC cannot be claimed.

2. Food and Beverages

ITC cannot be claimed on food and beverages served in the hotel, irrespective of whether it is consumed in the room or the hotel’s restaurant.

3. Club Membership Fees

If the hotel provides any club membership services, ITC cannot be claimed on the fees paid for such services.

Calculation of ITC on Hotel Bills

The ITC on hotel bills can be calculated by adding up the GST paid on the hotel bill and entering it in the GSTR-2A form. The GSTR-2A form is an auto-populated form that shows the details of all the purchases made during a particular period, along with the GST paid on them. The ITC amount calculated from GSTR-2A can be used to set off the tax liability in the GSTR-3B form.

Common Errors to Avoid While Claiming ITC on Hotel Bills

Here are some common errors that businesses should avoid while claiming ITC on hotel bills:

• Not ensuring that the hotel bill is in the name of the business.
• Not verifying that the GSTIN mentioned on the hotel bill matches the GSTIN of the business.
• Paying the hotel bill in cash instead of through a bank account or digital mode.
• Claiming ITC on food and beverages served in the hotel.
• Claiming ITC on club membership fees.

Filing GST Returns for Claiming ITC on Hotel Bills

To claim ITC on hotel bills, businesses must file their GST returns on time. The GSTR-2A and GSTR-3B forms must be filed accurately to claim the correct amount of ITC. It is also essential to ensure that the GSTIN mentioned on the hotel bill matches the GSTIN of the business.

Conclusion

In conclusion, businesses can claim ITC on hotel bills if the hotel bill is in the name of the business, contains the GSTIN of the business, is for business purposes, and is paid through a bank account or digital mode. However, ITC cannot be claimed on food and beverages served in the hotel, club membership fees, and if the hotel room is used for personal purposes. By understanding the conditions for claiming ITC on hotel bills, businesses can reduce their tax liability and improve their cash flow.

FAQs

Can we claim ITC on hotel bills for personal travel?

No, ITC cannot be claimed on hotel bills for personal travel.

Can we claim ITC on food and beverages served in the hotel?

No, ITC cannot be claimed on food and beverages served in the hotel.

Can we claim ITC on club membership fees paid to the hotel?

No, ITC cannot be claimed on club membership fees paid to the hotel.

Can we claim ITC on hotel bills paid in cash?

No, ITC cannot be claimed on hotel bills paid in cash.

What is the GST rate applicable on hotel bills?

The GST rate applicable on hotel bills varies based on the room tariff and other services availed by the customer. It can be 0%, 12%, or 18%.