GST on Hotels and Restaurants 2026: New ITC Rules From 1 Nov
Reports say Notification 06/2026-Central Tax (Rate) dated 27 October 2026 rewrites the input tax credit conditions for 5% hotels, restaurants and caterers from 1 November 2026. Credit is limited to the same kind of service, and a 2.5% cap applies in two cases.
What changed
When: 1 November 2026, as reported. Notification dated 27 October 2026.
| Before | From 1 Nov 2026 (reported) |
|---|---|
| Credit for 5% restaurants and caterers | |
| Credit on other goods and services barred | Only same-line credit, for example restaurant service bought from another restaurant |
| Hotel accommodation bought from another hotel | |
| Credit rules not capped | Credit capped at 2.5% central tax even if 9% was charged |
| Outdoor catering bought from another caterer | |
| Credit rules not capped | Credit capped at 2.5% central tax |
| Passenger and goods transport in electric vehicles | |
| No separate entry | New entries: 2.5% central tax with same-line credit, or 9% option |
What changes in GST for hotels and restaurants from 1 November 2026?
TaxGuru and Corporate Law Updates both report Notification 06/2026-Central Tax (Rate) dated 27 October 2026. It amends Notification 11/2017 and starts on 1 November 2026.
The 5% entries for hotel rooms, restaurants, railway catering and outdoor catering get rewritten credit conditions. In short, credit is allowed only for the same kind of service.
Which input credit is still allowed?
Both reports list the same-line credits. Hotel accommodation bought from another hotel supplier. Restaurant service bought from another restaurant, but not at specified premises. Railway catering food and drink bought from Indian Railways, IRCTC or their licensees. Outdoor catering bought from another caterer.
Credit on other goods and services used is barred for these 5% entries.
What is the 2.5% credit cap?
For hotel accommodation and outdoor catering, if your supplier charges central tax above 2.5%, you can claim credit only up to 2.5% of the value.
Both reports give examples. A hotel room bought for ₹10,000 with 9% central tax gives credit of ₹250, not ₹900. Outdoor catering bought for ₹60,000 with 9% central tax gives credit of ₹1,500, not ₹5,400.
What is new for electric vehicle transport?
Both reports say there are new entries for passenger transport in electric vehicles and for renting electric vehicles for passengers or goods, where battery charging cost is included in the price.
The central tax rate is 2.5% with same-line credit capped at 2.5%. A 9% option is also given. E-bicycles are included in the new definition of electrically operated vehicle.
What should a restaurant or caterer do?
Check which of your purchases are same-line services. Most kitchen goods and other services will not give credit under the 5% entries. Update your purchase ledger before November returns.
New restaurant owners can read our restaurant licence guide and GST registration guide.
Frequently asked questions
What is the new ITC rule for restaurants from 1 November 2026?
Reports say only same-line credit is allowed, such as restaurant service bought from another restaurant. Credit on other goods and services is barred.
What is the 2.5% cap for hotels and caterers?
If your hotel room or outdoor catering supplier charges central tax above 2.5%, credit is limited to the 2.5% amount.
Is there a new rate for electric vehicle rides?
Reports say new entries give 2.5% central tax with same-line credit, or a 9% option, where charging cost is included in the price.
Is this confirmed by the official notification?
Not yet by us. TaxGuru and Corporate Law Updates describe the notification dated 27 October 2026. We will update this page when we have read it on the official site.
Restaurant par ITC kab milega?
Reports ke mutabik 1 November 2026 se sirf same-line service ka credit milega, jaise doosre restaurant se li gayi restaurant service. Baaki par credit band. Official notification padhkar hi pakka karein.
Short summary in Hinglish
Reports ke mutabik 27 October 2026 ki Notification 06/2026 se 1 November 2026 se 5% wale hotel, restaurant aur caterer ke liye ITC ke niyam badal rahe hain: sirf same-line service ka credit aur do jagah 2.5% ki seema. Official notification humne abhi nahi padhi.
