In India’s dynamic business environment, corporate travel is no longer an occasional activity, it’s a necessity. Executives and employees frequently travel across cities for meetings, client engagements, training programs, audits, and operational oversight. Naturally, these trips often include hotel stays, which are booked either directly, through travel portals, or via corporate travel agencies.
While such accommodation expenses may seem routine, they carry significant financial and compliance implications under India’s Goods and Services Tax (GST) regime. Every hotel bill can potentially qualify for Input Tax Credit (ITC), a mechanism that allows businesses to claim credit for the tax paid on goods and services used in the course of business. When managed correctly, these credits can substantially reduce a company’s overall tax liability.
However, tapping into this benefit isn’t as simple as collecting hotel bills. The GST rules for hotel accommodations have varying tax rates based on room tariffs state-specific GST registration requirements and invoice format compliance. Adding to the complexity, employees often overlook the need to collect GST-compliant invoices, or hotels fail to include crucial information like the business GSTIN, SAC codes, or accurate tax breakdowns.
Moreover, the task of collecting, verifying, and reconciling these invoices with GSTR-2B data often falls on already stretched finance teams.
This blog delves into the complexities of GST on hotel expenses, explores the conditions for claiming Input Tax Credit (ITC), and highlights common challenges businesses often encounter.
GST Applicability on Hotel Accommodation
Under the GST framework, businesses are allowed to claim Input Tax Credit (ITC) on hotel accommodation expenses, provided specific conditions are met. While the GST rates vary depending on room tariff, the ability to claim credit is governed not just by the rate but also by compliance with invoice, registration, and usage criteria.
Room Tariff (per night)Applicable GST RateITC Eligibility
Up to ₹1,000 Exempt No ITC
₹1,001 to ₹7,500 12% ITC Available
Above ₹7,500 18% ITC Available
ITC Eligibility for Businesses
While hotel stays are a common part of business operations, claiming Input Tax Credit (ITC) on such expenses requires careful attention to specific conditions as per GST law. Even a minor lapse—such as an incorrect GSTIN or an invoice not uploaded by the supplier—can result in rejected claims and financial loss.
Here’s a detailed look at the key conditions businesses must meet to avail ITC on hotels:
1. GST-Compliant Invoice
To be eligible for the ITC, the hotel must issue a valid, GST-compliant tax invoice. This document serves as the legal basis for claiming input credit and must contain the following critical details:
- Supplier GSTIN: The GST identification number of the hotel.
- Recipient GSTIN: The business’s GSTIN (specific to the state where the service is rendered).
- Invoice Number and Date: Unique invoice number and the date of issue.
- HSN/SAC Code: Service Accounting Code for accommodation services (commonly SAC 9963).
- Tax Breakdown: Segregated CGST + SGST or IGST, depending on inter/intra-state transaction.
- Taxable Amount & Description: Accurate charges for room rent, duration, and applicable GST rate.
If any of the above elements are missing or incorrect—particularly the business’s GSTIN, the ITC claim may be disallowed during audits or reconciliation.
2. Correct State GSTIN Usage
GST in India is state-specific, and input tax credit can only be claimed if the hotel invoice is issued to a GSTIN registered in the same state where the hotel is located. Here’s why this matters:
- If your business has a GSTIN in the same state as the hotel, the hotel will charge both CGST + SGST. And, that can be claimed.
- If your business does not have a registration in that state, the hotel still charges CGST + SGST—but in this case, the credit cannot be availed, as ITC on state taxes can only be claimed in the state where the recipient is registered.
Example:
If a Mumbai-based employee stays at a hotel in Bengaluru and the invoice is billed to the Maharashtra GSTIN of the company, the business cannot claim on the Karnataka CGST/SGST.
To address this, companies with frequent interstate travel may choose to register under GST in multiple states or ensure that bookings are made in the name of their local branch where they hold a valid GSTIN.
3. Reflection in GSTR-2B
Even with a proper invoice, ITC can only be claimed if the corresponding transaction:
- Is uploaded by the hotel in their GSTR-1 return, and
- Appears in the recipient company’s GSTR-2B auto-generated statement.
If the hotel delays or fails to file its GST return, the invoice won't appear in the GSTR-2B. As a result, the Input Tax Credit (ITC) may become temporarily or even permanently ineligible, depending on the filing timeline.
Businesses must ensure:
- They track hotel invoices to confirm their appearance in GSTR-2B.
- They reconcile input tax data monthly before filing GSTR-3B.
- They follow up with non-compliant hotels to ensure timely filing.
This process can be tedious and error-prone when done manually, especially for companies with multiple travelers and bookings each month.
Common Challenges in Hotel GST Compliance
Despite clear rules, several practical hurdles prevent businesses from claiming eligible ITC:
- Incorrect GSTINs or Missing Details: Hotels frequently fail to collect the correct GSTIN from guests or omit it from the invoice, making the bill non-compliant for GST purposes.
- State Registration Mismatch: If the company does not have a GST registration in the state where the hotel is located, the CGST + SGST charged by the hotel cannot be claimed (unlike IGST).
- Manual Tracking: Collating hotel invoices from multiple employees, cities, and vendors is often a manual, time-consuming process prone to data mismatches and lost credits.
- Delayed or Non-Filing by Hotels: If the hotels fail to upload the invoices in GSTR-1, the transaction will not reflect in GSTR-2B. Such credits are not eligible for a claim.
How Finkraft Solves This
Finkraft, an AI-driven fintech platform, enables enterprises to simplify and manage their GST compliance process more efficiently, particularly in complex scenarios such as hotel-related travel expenses. Here's how:
- Automated Invoice Retrieval: Finkraft can fetch GST-compliant hotel invoices from email, travel partners, or integrated systems.
- Smart Validation Engine: It verifies GSTINs and HSN codes while ensuring the invoice aligns with the corresponding booking and payment records.
- State-Wise GSTIN Mapping: Helps ensure invoices are raised against the correct GST registration, improving ITC eligibility.
- Reconciliation Dashboard: Real-time visibility into claimable vs. non-claimable hotel GST with alerts for mismatches or missing filings.
- Seamless GSTR Sync: Reconciles hotel invoices with GSTR-2B filings to confirm ITC readiness.
Conclusion
Hotel stays are a large part of corporate travel. Efficient GST management here means real savings and stronger compliance. However, due to state-wise registration requirements and compliance complexities, many businesses either miss out on eligible claims or spend disproportionate effort trying to claim them.