GST for Manali Hotels and Homestays: The ₹7,500 Room Line, Restaurant Rate and OTA Payouts
GST on a hotel or homestay room in Manali depends on what each room actually sells for each night. Up to ₹7,500 a night it is 5% with no input tax credit, and above ₹7,500 it is 18% with credit. In the valley, the trap is the season: a room that sells for ₹5,000 in October can go for ₹9,000 over New Year, and one such night can change the rate on your restaurant for the whole of the next year. This guide sets out the rules in force since 22 September 2025 and how to apply them to a seasonal hill-station property.
The rates in one table
| What you sell | GST | Input tax credit |
|---|---|---|
| Room up to ₹7,500 per night | 5% | No |
| Room above ₹7,500 per night | 18% | Yes |
| Restaurant in a “specified premises” (see below) | 18% | Yes |
| Restaurant anywhere else | 5% | No |
| Breakfast or meals included in the room price, not billed separately | Same as the room | Same as the room |
The ₹7,500 test is per room, per night, at the price you actually charge
- It is the actual price, not the rack rate. A room listed at ₹9,000 but sold at ₹7,000 is taxed at 5%. A room listed at ₹6,500 but sold at ₹8,000 on Christmas Eve is taxed at 18% for that night.
- Extras count. An extra bed is added to the room price for the test, so a ₹7,000 room with a ₹1,500 extra bed is an 18% night. Early check-in and late check-out charges count too, unless they amount to another night.
- Each night is tested separately. The same room can be 5% on weekdays and 18% on a peak weekend, and your billing software has to switch the rate automatically.
“Specified premises”: how one peak night moves your restaurant to 18%
A hotel is a specified premises for a financial year if, in the previous financial year, it sold any room at more than ₹7,500 a night. Restaurant service in a specified premises is taxed at 18% with credit for the whole year, instead of 5% without credit.
For a Manali property this happens easily. A few nights over New Year or in the snow season at ₹8,000 or ₹9,000 are enough. The restaurant bill for every guest the following year, April to March, then carries 18%. Keep a record of the highest price sold for any room each year, and decide the restaurant rate for the next year by 31 March.
You can also choose this status. A registered hotel can declare its premises a specified premises for the next financial year between 1 January and 31 March, in Annexure VII on the GST portal (Services, Registration, Declaration for Specified Premises). A new applicant can declare it in Annexure VIII within 15 days of the registration application. Once you opt in, the status continues until you opt out in Annexure IX, filed in the same 1 January to 31 March window. Opting in makes sense for a hotel with a large, input-heavy restaurant, because the 18% rate comes with full input tax credit.
Input tax credit when you sell at both rates
Most valley hotels sell some nights at 5% and some at 18%. Credit is allowed only on what goes into the 18% supplies. Credit on things used for both (electricity, linen, repairs, software, the renovation contractor) has to be split each month, and the share belonging to the 5% supplies reversed under rules 42 and 43 of the CGST Rules. Hotels that skip this monthly split are the ones that get the largest demands in a GST audit.
Bookings through MakeMyTrip, Booking.com, Airbnb and others
- For a small property that is not required to register, the platform pays the GST on rooms booked through it.
- Once you are registered, the platform deducts a small GST TCS from your payouts and reports it in its GSTR-8 return. Claim it in your electronic cash ledger every month; it is your money.
- Platforms also deduct income-tax TDS from payouts, which shows up in your AIS. Match both against your own sales register before you file.
- The commission the platform charges you carries 18% GST, and you can claim that credit only on the share of your sales that are 18% supplies.
Registration and the rest of the paperwork
- GST registration is compulsory once turnover crosses ₹20 lakh in a year, the limit for services in Himachal. Homestays in the Gold and Diamond categories need a GSTIN under the Home Stay Rules 2025 regardless of turnover.
- Returns: GSTR-1 and GSTR-3B every month or quarter, including the off-season months when there are no bookings. Nil returns are still returns.
- E-invoicing applies once aggregate turnover crosses ₹5 crore in any year since 2017-18; most valley hotels are below it, but a group with several properties can cross it together.
- Tourism registration: a hotel also has to be registered with the state Tourism Department, separate from GST.
A quick example
A 12-room hotel near Old Manali sells rooms at ₹4,500 to ₹6,500 most of the year, but at ₹8,500 for ten nights around New Year 2026-27. Those ten room-nights are taxed at 18%; the rest at 5%. Because rooms sold above ₹7,500 during 2026-27, the hotel is a specified premises for 2027-28, and its restaurant must charge 18% from 1 April 2027, with credit on the restaurant’s inputs. Credit on common costs is split every month in the ratio of 5% and 18% sales.
Mistakes we see in the valley
- Charging 5% on every night all year, including peak nights above ₹7,500.
- Claiming full credit on everything while most room-nights are at 5%.
- Forgetting the extra-bed charge when testing the ₹7,500 line.
- Not noticing that last winter’s peak prices made the restaurant an 18% supply this year.
- Not claiming the TCS that booking platforms deducted.
- Stopping returns during the off-season.
Frequently asked questions
What is the GST on a hotel room in Manali?
5% without input tax credit if the room sells for up to ₹7,500 a night, and 18% with credit above ₹7,500. The test is applied to each room for each night at the price actually charged.
Is the ₹7,500 limit per room or per booking?
Per room, per night. A booking for three rooms at ₹4,000 each is three 5% supplies, not one ₹12,000 supply.
My rooms cross ₹7,500 only in peak season. Does my restaurant pay 18%?
From the next financial year, yes. If any room sold above ₹7,500 a night in the previous financial year, the hotel is a specified premises and its restaurant service is taxed at 18% with credit.
Can a hotel choose 18% with credit for its restaurant?
Yes. File Annexure VII on the GST portal between 1 January and 31 March for the next financial year. The choice continues until you opt out in Annexure IX.
Do I need GST registration for a small homestay?
Under GST law, only once turnover crosses ₹20 lakh in a year. Gold and Diamond homestays need a GSTIN under the Himachal Home Stay Rules whatever their turnover.
Get your rates and credit right
TAXAJ sets up GST registration, configures the night-by-night rate in your billing, files the GST returns and does the monthly credit split for hotels across Kullu and Manali. For the wider picture, see our GST guide for hotels and restaurants and our hotels and resorts services, or talk to our Manali team.
Last updated 16 October 2026. Sources: Notification No. 11/2017-Central Tax (Rate), entry 7, as amended with effect from 22 September 2025; the definition of “specified premises” and the Annexure VII, VIII and IX declarations; GSTN advisory of 4 January 2026 enabling online declarations; rules 42 and 43 of the CGST Rules, 2017. General information only; check your own billing before applying it.
