The Ministry of Finance dated Notification No. 06/2026-Central Tax (Rate) on 27 October 2026. It amends the services rate notification that covers hotel accommodation, restaurants and outdoor catering. The change lets suppliers who work under restricted input tax credit claim credit on eligible inward services in the same line of business. The new rules take effect on 1 November 2026. Matching IGST rate changes were published the same day.
Input tax credit is the tax paid on purchases that a business can set off against the tax it collects from customers. For hotel rooms sold under the concessional 2.5% central tax option, credit on most goods and services stays blocked. The revision now permits credit on hotel accommodation bought from another hotel supplier. Where that upstream hotel charges central tax above 2.5%, the buyer’s credit is capped at 2.5% of the inward service value. The same capped same-line credit applies to outdoor catering, and restaurants get a same-line exception for restaurant services bought from another restaurant.
Our view is that hotel groups that buy rooms from sister properties or third-party hotels under the concessional rate gain the most, while pure cash-only independents see little change. The notification keeps the broad credit block in place, so this is a narrow fix, not a full opening of credit. Coverage has focused on the effective date and has said little about how software and invoices must show the capped credit. Indian GST changes of this type usually force a scramble in the first fortnight as firms rebuild invoice rules. We expect large hotel chains to issue internal GST memos within one week of 1 November, and at least one trade body to publish a working note within 30 days. Confidence: high.
This is important for our readers because the rule that governs same-line hotel and catering credit changes on 1 November. Ask your GST team this week whether your property sells under the concessional rate and buys rooms or catering from other suppliers. Update your invoice templates so the capped 2.5% credit is clear. If you are a catering contractor, ask your hotel clients in writing how they will treat your invoices from 1 November.
Sources:
TaxGuru, 27 Oct 2026
JurisHour, 29 Oct 2026
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