ITC on Hotel Accommodation: Why It Is Usually Lost — and How an Event Organiser Changes the Answer

Almost every business pays GST on hotel stays. Very few actually get the credit. The loss is rarely due to any prohibition on accommodation itself — it is the result of separate rules that most people never look at together.

Rule one: the rate decides whether credit exists

Since the GST 2.0 rationalisation of 22 September 2025, accommodation is taxed on the value of supply per unit per day:

• Below ₹1,000 — Nil

• ₹1,000 to ₹7,500 — 5%, with no input tax credit

• Above ₹7,500 — 18%, with full input tax credit

The 5% rate is not optional. Where the room falls in that band, the hotel must charge 5% and cannot choose 18% so that you may claim credit. If your team stays in rooms at ₹6,000 a night, there is no ITC to discuss — the tax was never charged at a creditable rate.

Rule two: even at 18%, place of supply usually takes it away

Under Section 12(3)(b) of the IGST Act, the place of supply of lodging accommodation by a hotel is the location of the hotel — not of the guest, and not of the company paying.

So a Kolkata company whose director stays in Mumbai receives an invoice charged with CGST and SGST of Maharashtra. A person registered only in West Bengal cannot use those credits. Such invoices appear in GSTR-2B marked "ineligible", reason "PoS different from recipient State". This position is supported by advance rulings, including Gogte Infrastructure (AAR Karnataka).

A stay within your own state is different — there the credit is available normally if the room is above ₹7,500.

Booking through an agent: the invoice decides everything

This is where most of the confusion lies, because three completely different structures are all loosely called "booking through an agent". They have different consequences.

Structure 1: The agent as a pure agent (Rule 33)

The hotel raises its invoice in your name. The agent pays on your behalf, shows that amount separately as a reimbursement at actuals, and charges GST only on its own service fee.

• The room charge is excluded from the agent's value of supply — the agent cannot charge 18% on it

• The hotel invoice remains a hotel invoice, so the place of supply is still the hotel's state — no credit on the room

• You do get credit on the agent's fee, since that is an ordinary service taxed at 18% with place of supply at your location

This structure gives you the least credit.

Structure 2: The agent supplies on its own account

The agent books the rooms in its own name, bears the risk, and raises a single invoice on you at 18%.

Here the position improves materially. The supply is not "lodging accommodation by a hotel" — the agent is not a hotel. Advance rulings have held that arranging accommodation by a person other than the hotel is classifiable under SAC 998552 (reservation services for accommodation), a support service taxable at 18%.

Because Section 12(3)(b) speaks specifically of accommodation by a hotel, an agent's arranging service falls outside it and takes the default rule in Section 12(2) — place of supply is the location of the registered recipient, that is, you. The tax is creditable in your hands.

Structure 3: A genuine event organiser (Section 12(7))

Section 12(7) covers organisation of an event, including services in relation to a conference, fair, exhibition, celebration or similar events, and services ancillary to it. Supplied to a registered person, the place of supply is the location of that person.

This is the strongest position where a conference, dealer meet or exhibition is genuinely involved — accommodation for your team then travels inside a supply on which credit is clearly available.

The critical point: pure agent and 18% cannot coexist

Now to the question we are asked most often.

Suppose the agent's invoice reads: "Hotel room booked for 2 persons from 12 to 15 March; travel 11 to 16 March; for participation in XYZ Exhibition" — and charges 18% on the whole amount.

That invoice is internally inconsistent, and the inconsistency is the risk.

If the agent were truly acting as a pure agent, the room charge would have to be excluded from its value of supply and shown separately as a reimbursement at actuals, with the hotel's invoice in your name. It could not charge 18% on it. The moment 18% is charged on the full amount, the agent has supplied on its own account — Structure 2, not a pure agent. You cannot have both.

Assuming Structure 2 is what actually happened, the credit is defensible. But that wording creates two avoidable problems:

• It describes the supply as a hotel room, which invites the department to argue that the substance is accommodation and the place of supply is the hotel's state under Section 12(3)(b)

• It does not describe organisation of, or services in relation to, an exhibition — so it does not by itself bring you within Section 12(7), even though an exhibition is mentioned in passing

Merely naming an exhibition on a room-booking invoice does not convert a booking service into event organisation.

How the invoice should read instead

The invoice must describe what the agent has actually supplied, consistently with how it has taxed it:

• Where the agent has organised or supported your participation in the event — "Exhibition participation and event support services" or "Event organisation services", under the appropriate SAC, taxed at 18%

• Where the agent has only arranged accommodation on its own account — "Accommodation reservation and arrangement services (SAC 998552)", taxed at 18%, with the exhibition referred to as the purpose rather than as the supply

• Where the agent is a genuine pure agent — the room shown separately as a reimbursement, GST charged only on the service fee

Supporting papers should match: work order or engagement letter setting out the scope, exhibition or stall allotment letter, delegate list, and the agent's own booking confirmations. Where the agent supplies on its own account, the hotel's invoice should be in the agent's name, not yours — two invoices for the same room in different names is the fastest way to lose the argument.

A candid word. The treatment of an agent's accommodation service is a grey area on which the department does take a contrary view, particularly where the paperwork reads like a pass-through. The position is defensible, but it rests on substance and documentation, not on the label alone.

One trap even with a genuine event

If the hotel itself gives you a banquet hall for your conference and bills you directly, Section 12(3)(c) applies — accommodation in immovable property for organising a function. Place of supply is again the property's location. The hotel's own banquet invoice does not become creditable merely because a conference was held there. The relief under Section 12(7) attaches to the organiser's supply, not the hotel's.

Food and beverages remain blocked

Separately, Section 17(5)(b) blocks credit on food and beverages and outdoor catering, unless you are in the same line of business or it forms part of a taxable composite or mixed supply you make onward. The restaurant and room-service portion of a hotel bill is therefore generally unavailable regardless of place of supply.

Other routes worth considering

• Registration in that state, where you have a real presence, recurring activity and substantial spend

• Casual taxable person registration, for a limited-period exhibition in another state, allowing local credits against local output tax

• Choosing the tariff band deliberately — above ₹7,500 carries 18% with credit; just below carries 5% with none

A checklist before you book

1. Is the stay within your own state? If yes, and the room is above ₹7,500, claim normally.

1. If outside your state, a direct hotel invoice will not give you usable credit.

1. Is it connected to a conference or exhibition? Contract for the event as a whole, not for rooms.

1. Decide before booking whether the agent is a pure agent or supplying on its own account — and make the invoice, the hotel billing name and the GST charged all consistent with that choice.

1. Ensure the invoice describes the actual service, with the correct SAC.

1. Separate out food and beverage charges and do not claim them.

1. Reconcile with GSTR-2B and never claim what is flagged ineligible for place-of-supply reasons.

The single most expensive habit here is deciding the tax treatment after the invoice arrives. By then the billing name, the description and the rate are already fixed, and there is very little left to argue with. If you have an exhibition, dealer meet or conference coming up, the time to structure it is before the first booking is made. Get in touch.