Key Takeaways
- Under section 12(3) of the IGST Act, the place of supply for hotel accommodation is the location of the property, so a stay is normally taxed as CGST and SGST of the hotel’s state.
- Because GST registration is state-wise, that credit can be used only through a GSTIN registered in the hotel’s state.
- A stay billed to the head-office GSTIN in another state, or to no GSTIN, usually leaves the GST as a cost unless the invoice is corrected.
Airline GST and hotel GST look similar on an expense report. Under the GST law they behave very differently. For a hotel stay, the deciding factor is not where your company is registered or where the traveller is based. It is where the hotel stands. Getting this wrong is one of the most common reasons hotel GST ends up as a cost rather than credit.
The Rule: The Hotel’s Location Decides
Section 12(3) of the IGST Act sets the place of supply for services directly related to immovable property. It specifically includes lodging accommodation by a hotel, inn, guest house, home stay, club or campsite. For these services, the place of supply is the location of the property.
The hotel and the place of supply are therefore in the same state. That makes the stay an intra-state supply, taxed as central tax plus state tax of the hotel’s state, whichever state the guest’s company is registered in.
How a Business Stay Is Taxed
| Question | Answer for a hotel stay |
|---|---|
| Place of supply | The state where the hotel is located |
| Tax charged | CGST and SGST of that state |
| GSTIN on the invoice | Your registration in that state, where you have one |
| Where the credit can be used | Only through a GSTIN registered in that state |
Source: IGST Act, 2017, section 12(3); CGST Act, 2017, section 16.
Why Credit Gets Stuck
GST registration is state by state. A company registered in Haryana cannot take credit for Maharashtra state tax through its Haryana GSTIN. So when a traveller from the Gurugram office checks into a Mumbai hotel and gives the head-office GSTIN, the hotel still charges Maharashtra CGST and SGST, but the invoice is billed to a registration that cannot use it.
If the company has a Maharashtra GSTIN, the fix is to have the invoice issued to that registration. If it has no registration in the hotel’s state, the GST on the stay generally cannot be claimed and is a cost of travel.
The registration on the invoice has to match the hotel’s state, not the traveller’s home office. That is decided at check-in, so it is a travel desk issue as much as a tax one.
A Worked Example
Take a company registered in Haryana, Maharashtra and Karnataka (illustrative). Three employees from the Gurugram office travel in the same week.
Three Stays, Three Outcomes
Illustrative
| Hotel location | GSTIN on invoice | Tax charged | Result |
|---|---|---|---|
| Mumbai | Maharashtra | CGST and SGST | Claimable, subject to the usual conditions |
| Bengaluru | Haryana | CGST and SGST | Billed to the wrong registration; needs correction to the Karnataka GSTIN |
| Chennai | Haryana | CGST and SGST | No registration in Tamil Nadu; generally a cost |
Source: TraCarta illustrative example.
The three stays may cost much the same. Only one of them produces usable credit as billed. The second can be fixed, but only if someone notices and asks the hotel for a corrected invoice in time.
When the Tax Type Is Wrong
Some hotels charge IGST because the guest’s company is registered in another state. Under the place of supply rule for accommodation, CGST and SGST of the hotel’s state are normally due instead. An invoice with the wrong tax type does not fit the rule and should be corrected by the hotel. It is worth checking the tax type on every invoice, not only the GSTIN.
What Finance Teams Can Do
- Give the travel desk a GSTIN list by stateEvery booking should carry the registration for the state where the hotel is located.
- Check the GSTIN and tax type on each invoiceCompare them with the hotel’s state, not the traveller’s office.
- Separate fixable from unfixable staysWrong registration in a state where you are registered can be corrected. Stays in states where you hold no GSTIN generally cannot carry credit.
- Ask for corrections earlyCredit for a financial year must be claimed by 30 November of the following year or the date of the annual return, whichever is earlier, under section 16(4) of the CGST Act.
- Watch where the stays areA regular pattern of stays in a state without a registration is information worth sharing with the tax team.
Hotel credit is decided at check-in. By the time the invoice reaches finance, the state is already on it.Ashish Kumar, Managing Partner
How TraCarta Helps
Our Hotel GST Reconciliation works only with GST e-invoices from the government e-invoice system. With your approval of API access, and no passwords shared, we pull every hotel e-invoice billed to your GSTINs, match each one to your bookings and check the GSTIN, tax type and value. Each month you receive a reconciliation showing what can be claimed, what needs review and what needs correcting, with a copy of every matched e-invoice. Stays with no e-invoice, and invoices that need correcting, are flagged with exactly what is needed, for your travel desk or travel agency to follow up.
Sources
- CBIC, IGST Act, 2017 (section 12)
- CBIC, CGST Act, 2017 (sections 16 and 17)
- CBIC, CGST Rules, 2017 (rule 46)
General information only, not tax advice. Check the current law and your facts before acting.
