Ministry of Finance Amends GST Rate Notifications for Hospitality, Electric Vehicles, and Infrastructure Concessionaires

The Central Government has overhauled the Goods and Services Tax framework for the hospitality, transportation, and infrastructure sectors, capping Input Tax Credit for intra-industry service procurement and formalizing tax liabilities for Toll-Operate-Transfer concessionaires. These changes, intended to refine taxability and compliance in the services sector, were notified by the Department of Revenue on October 27, 2026.

Background

The Department of Revenue, Ministry of Finance, issued a series of notifications (Nos. 06/2026, 07/2026, 09/2026, and 10/2026 under Central Tax (Rate), Integrated Tax (Rate), and Union Territory Tax (Rate)) on October 27, 2026. These instruments amend principal notifications including Notification No. 11/2017-Central Tax (Rate), Notification No. 8/2017-Integrated Tax (Rate), and Notification No. 11/2017-Union Territory Tax (Rate), as well as Notification No. 12/2017-Union Territory Tax (Rate) and Notification No. 9/2017-Integrated Tax (Rate). The amendments follow the recommendations of the GST Council and exercise powers conferred under Section 9, Section 11, Section 15, and Section 148 of the Central Goods and Services Tax Act, 2017, along with corresponding provisions in the Integrated Goods and Services Tax Act, 2017 and Union Territory Goods and Services Tax Act, 2017. The updates aim to resolve ambiguities regarding Input Tax Credit (ITC) in hospitality, define the tax status of electrically operated vehicles including e-bicycles, and introduce a specialized tax payment mechanism for concessionaires under Toll-Operate-Transfer (TOT) models.

Stakeholders Impacted

These updates directly affect a broad spectrum of industries including hotel accommodation providers, restaurant service operators (excluding specified premises), and outdoor catering businesses. In the transport sector, entities involved in the transport of passengers or goods via electrically operated vehicles specifically including E-bicycles are now under a defined tax regime. Furthermore, concessionaires operating under the Toll-Operate-Transfer model and providing operation and maintenance (O&M) services to government authorities are subject to new tax payment rules. Other impacted parties include Goods Transport Agencies (GTAs), E-commerce Operators (ECOs) providing delivery services, and cultivators involved in coffee curing.

Key Provisions

Capping Input Tax Credit in Hospitality and Catering:

The notifications substitute entries in the principal rate schedules for hotel accommodation, restaurants, and outdoor catering. The core change mandates that if a supplier in the same line of business charges a tax rate higher than 2.5% (Central Tax) or 5% (Integrated Tax), the service recipient (the secondary supplier) cannot claim ITC in excess of the 2.5%/5% threshold. For example, if a hotel (Supplier B) procures accommodation from another hotel (Supplier C) at an 18% Integrated Tax rate but charges its client (Customer A) only 5% Integrated Tax, B can only claim ITC up to 5% of the procurement value.

Taxation of Electric Vehicles and E-bicycles:

The amendments insert new categories for the transport of passengers and renting of vehicles. A rate of 2.5% Central Tax (or 5% Integrated Tax) is applied to electrically operated vehicles designed to carry passengers or goods, provided the cost of battery charging is included in the consideration. The definition of "electrically operated vehicle" has been expanded in the Explanation clause to explicitly include E-bicycles.

New Class of Taxpayers for Infrastructure Projects:

Under Notification No. 10/2026-Central Tax (Rate), concessionaires who provide O&M services to concessioning authorities (Government or local bodies) during a concession period are identified as a special class. These registered persons are now required to pay tax on the supply of O&M services based on the amount charged or debited from the Escrow Account towards O&M expenses.

Expanded Exemptions and Clarifications:

Services provided by the Seamen's Provident Fund Organisation to persons governed by the Seamen's Provident Fund Act, 1966 are now exempt (Nil rate). Similarly, the grant of exclusive right of way, access, or license to collect toll fee by Government entities is exempted. In the agricultural sector, services for the curing of coffee supplied to cultivators, as defined under the Coffee Act, 1942, are also brought under the Nil tax bracket.

Practical/Compliance Impact

The primary compliance burden falls on hospitality and catering businesses, which must now recalculate their ITC eligibility when procuring services from intra-industry peers who charge full tax rates. For Goods Transport Agencies, the definition of "GTA" is clarified to mean any person providing road transport services who issues a consignment note. Furthermore, delivery services supplied through E-commerce Operators are subject to revised registration triggers under Section 22(1) of the Central Goods and Services Tax Act, 2017. Concessionaires in TOT models must ensure their tax payments align with the specific tax periods in which O&M expenditures are charged or debited from their respective Escrow Accounts.

Effective Date

All provisions contained in these notifications, including Notification Nos. 06/2026 to 10/2026 across Central Tax, Integrated Tax, and Union Territory Tax categories, are scheduled to come into force on November 1, 2026. The documents were formally issued and signed by the Under Secretary to the Government of India on October 27, 2026.