In order to give effect to the 57th GST Council meeting, the Ministry of Finance has amended the GST framework for hotel accommodation, restaurant services, railway food supplies, outdoor catering, electric vehicle transportation and certain delivery services, with the changes taking effect from November 1, 2026.
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The Ministry has amended Notification No. 11/2017-Central Tax (Rate). A key change permits specified suppliers operating under restricted input tax credit conditions to claim credit on eligible inward supplies in the same line of business.
For hotel accommodation, outdoor catering and the newly inserted electric vehicle service entries, the notification also restricts the eligible central tax credit to an amount calculated at 2.5% of the relevant inward supply value, where the upstream supplier charges central tax at a higher rate.
The percentages specified in this Central Tax notification represent the CGST component. They should be distinguished from the combined GST rate applicable after accounting for the corresponding State or Union Territory tax.
Hotel Accommodation: Credit Allowed On Services Procured From Another Hotel Supplier
The notification substitutes the input tax credit condition against serial number 7, item (i), of the principal services rate notification.
Under the revised condition, credit on goods and services used to supply the covered hotel accommodation service remains restricted. However, an exception now permits credit on hotel accommodation services procured from another supplier of hotel accommodation services.
Where the upstream supplier charges CGST above 2.5%, the recipient cannot claim the entire tax charged. Credit is restricted to the tax calculated at 2.5% of the value of that inward accommodation service.
The notification illustrates this through a transaction in which a customer books accommodation from an intermediary supplier for ₹7,000 per unit per day. The intermediary procures accommodation from another supplier for ₹10,000 per unit per day and is charged CGST of ₹900 at 9%.
Although the intermediary charges its customer CGST at 2.5%, it can claim only ₹250 as credit on the inward accommodation service, calculated at 2.5% of ₹10,000, instead of the ₹900 charged upstream.
The illustration makes clear that the credit ceiling is calculated on the value of the eligible inward service.
Restaurant Services: Exception For Services Procured In The Same Business
For restaurant services covered by serial number 7, item (ii), the revised condition permits credit on restaurant services procured from another provider of restaurant services other than at specified premises.
The general restriction on credit for other goods and services used in making the covered outward supply continues under the substituted wording.
Accordingly, the amendment provides a specific exception for eligible restaurant services purchased from another restaurant service provider. It does not introduce unrestricted credit for all restaurant expenses.
Railway Food Supplies: Credit Exception Covers Inputs And Input Services
The notification separately revises the condition for supplies covered by serial number 7, item (iii), concerning food, articles for human consumption and drinks supplied in trains or at platforms.
The substituted condition permits credit on inputs and input services in the same line of business procured from Indian Railways, IRCTC or their licensees.
This wording differs from the hotel and restaurant amendments because it expressly covers both inputs and input services within the identified railway food supply chain.
Credit on other goods and services used in supplying the covered service remains subject to the restriction stated in the entry.
Outdoor Catering: Eligible Credit Capped Where Upstream Tax Is Higher
The conditions against serial number 7, items (iv) and (v), have also been substituted to permit credit on outdoor catering services procured from another outdoor catering supplier.
For both entries, where the upstream supplier charges CGST above 2.5%, the recipient’s eligible credit is restricted to the amount calculated at 2.5% of the inward outdoor catering service value.
An illustration addresses a wedding arrangement involving a composite supply of outdoor catering together with renting of premises at premises other than specified premises.
In the example, a supplier charges the customer ₹1 lakh and engages another outdoor caterer for ₹60,000. The subcontracted caterer charges CGST of ₹5,400 at 9%.
The principal supplier, charging CGST of ₹2,500 at 2.5% on its outward supply, can claim ₹1,500 as credit on the subcontracted catering service—2.5% of ₹60,000—rather than the full ₹5,400.
The amendment therefore allows limited credit within the catering supply chain while retaining the restriction on other inward supplies under these entries.
Electric Passenger Transport: Two CGST Rate Options Introduced
A new item, serial number 8(vib), covers passenger transportation by electrically operated vehicles designed to carry passengers, where battery charging costs are included in the consideration charged to the service recipient.
The entry provides two CGST rate alternatives: 2.5% with specified credit restrictions, or 9% without the special credit condition shown against the lower rate.
Under the 2.5% alternative, credit is restricted except for eligible services in the same line of business. These include passenger transportation in an electrically operated vehicle or renting of an electrically operated vehicle procured from another service provider.
If the upstream supplier charges CGST above 2.5%, credit is capped at the amount calculated at 2.5% of the eligible inward service value.
In the notification’s example, a supplier charges ₹1,000 for transporting passengers from New Delhi to Gaya and hires an electric vehicle with an operator from another supplier for ₹800. The upstream supplier charges CGST of ₹72 at 9%.
Where the outward supplier charges CGST at 2.5%, the available credit is ₹20, calculated at 2.5% of ₹800, instead of ₹72.
Electric Vehicle Rentals For Passengers And Goods Covered Separately
The notification inserts two further entries under serial number 10.
Item (ib) covers renting an electrically operated vehicle designed to carry passengers, where the consideration includes battery charging costs.
Item (ic) covers renting an electrically operated vehicle for transporting goods, again where battery charging costs are included in the consideration.
Both entries provide CGST alternatives of 2.5% with restricted credit or 9% without the special credit restriction attached to the lower-rate alternative. General statutory ITC conditions remain relevant.
For passenger vehicle rentals under the lower-rate entry, eligible inward services include electric passenger transportation and electric vehicle renting services.
For goods vehicle rentals, the eligible same-line services include transportation of goods by an electrically operated vehicle and renting of an electrically operated vehicle.
In each case, upstream CGST exceeding 2.5% does not translate into an equivalent credit entitlement under the concessional option. The same 2.5% ceiling applies to the eligible inward service value.
Definition Of Electrically Operated Vehicle Includes E-Bicycles
The notification inserts an express definition of an “electrically operated vehicle.”
It covers a road vehicle running solely on electrical energy derived from an external source or from one or more batteries fitted to the vehicle. The definition expressly includes e-bicycles.
The requirement that the vehicle run solely on electrical energy is relevant when determining eligibility under the new entries. Inclusion within the definition must also be read alongside the conditions of the particular service entry, including the requirement concerning battery charging costs.
Specified Delivery Services At 2.5% CGST Without ITC
The notification substitutes serial number 12, item (iii), prescribing CGST at 2.5% for specified delivery services other than those covered by items (i) and (ii).
The substituted entry covers delivery services supplied through an electronic commerce operator where the service provider is not liable for registration under Section 22(1) of the CGST Act.
It also covers delivery services in relation to goods supplied through an electronic commerce operator.
The stated condition requires that credit of input tax charged on goods and services used in supplying the delivery service must not have been taken.
Unlike the revised hotel, restaurant and catering conditions, this delivery service entry does not contain an express exception permitting credit on inward services in the same line of business.
Goods Transport Agency Definition Substituted
The notification also substitutes the definition of “goods transport agency.”
Under the revised wording, a goods transport agency means any person providing a service in relation to transportation of goods by road who issues a consignment note, by whatever name called.
The issuance of a consignment note is therefore an express element of the substituted definition.
The notification additionally omits paragraph 3 of the principal notification.
Businesses Must Distinguish Eligible Credit From General Expenses
The amendments require affected businesses to identify the exact outward service entry and separately examine the nature of each inward supply.
For hotels and caterers operating under the relevant restricted-credit entries, the central issue will be whether a purchased service falls within the expressly permitted same-line business exception. Where the 2.5% ceiling applies, the credit calculation must also be separated from the amount of tax appearing on the upstream invoice.
Electric vehicle operators will need to assess the applicable service category, whether battery charging costs form part of the consideration, and the credit consequences of the chosen rate alternative.
All amendments under the notification take effect from November 1, 2026.
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