Calculating GST on the supply

In the hotel or food & beverage (“F&B”) industry, businesses often add a service charge, typically at 10%, to their bills. The service charge is subject to GST as it is part of the total price for goods and services provided.

The GST chargeable should be calculated based on the total price payable (inclusive of service charge).

Example 1: Calculating GST on the supply

Food & beverage$100.00
10% service charge$  10.00
9% GST (on $110.00)$    9.90
Total price with GST$119.90

The GST amount to be shown on the tax invoice or receipt may be rounded off to the nearest whole cent (i.e. two decimal places).

With the discontinuation of the issuing of one cent coins, some businesses have rounded their bills to the nearest five cents to facilitate cash payment by their customers. Whether a bill should be rounded up or down is a business decision.

Price displays

Goods and services not subject to service charge

As a GST-registered person, you must show GST-inclusive prices on all price displays, advertisements or publicity brochures to the public. Prices that are quoted verbally must also be GST-inclusive.

 If you choose to display both GST-inclusive and GST-exclusive prices, the GST-inclusive price must be at least as prominent as the GST-exclusive price. These requirements are to ensure that the members of the public know upfront the final price of goods and services that they have to pay. Failure to comply with each of these requirements is an offence that can result in a fine of up to $5,000.

Goods and services subject to service charge

As an exception, hotels and F&B establishments that impose service charge on goods and services may display GST-exclusive prices to ease their operations.

Similarly, F&B establishments that provide both dine-in and takeaway / delivery for the same food items, but service charge is imposed on dine-in only, are also allowed to display GST-exclusive prices.

As an administrative concession, there is no need to display two price lists, i.e. one showing GST-inclusive and one showing GST-exclusive price. Nonetheless, they must display a prominent statement informing customers that prices displayed are subject to GST and service charge.

For food items that are solely for takeaway / home delivery and are not subject to service charge (e.g. sales of mooncakes and New Year cookies etc.), the prices displayed must be GST-inclusive.

Please note that the above concession does not apply to:

  • Hotels and F&B establishments that do not impose a service charge; and
  • F&B establishments that levy a nominal service charge without genuine business reasons other than to avoid displaying GST-inclusive prices.

Such businesses are still required to display GST-inclusive prices. Failure to comply with the price display requirement could result in a fine.

Providing complimentary hotel room

Hotels may provide complimentary rooms as part of promotional packages to attract customers. GST is charged on the price of the whole promotional package.

Example 2: Complimentary hotel room as part of a package

As a promotional package, your hotel guest will get a complimentary room with the booking of three rooms. The price payable for the whole promotional package is $1,200. In this case, the GST is chargeable on $1,200.

Providing rooms for free for business purpose

When you provide the hotel room for free (without your client purchasing other goods or services) for business purpose, you do not need to account for GST because the hotel room remains as part of your business assets.

This is different from giving away goods for free such that the goods no longer form part of your business assets. For more information, please refer to gift and sample.

Providing rooms for free for non-business purpose

When you put the hotel rooms to private use or provide it for free for non-business purpose, you need to account for GST based on the full cost of providing the room.

For more information, please refer to putting asset to personal use.


Can I refuse to pay service charge?

It is common for businesses in the hotel or food and beverage industry to impose a service charge on their goods and services provided. IRAS does not interfere with such business decisions.

Whether the customer should pay for the service charge depends on the agreement between the customer and the business on the price payable for the goods and services provided.

My hotel guest has compensated the hotel for burning a hole in the carpet. Is the compensation subject to GST?

If the compensation is punitive in nature, there is no supply. Therefore, you do not need to charge GST on the compensation.

Is a service apartment treated as a residential or commercial property?

For the purpose of GST, service apartment is treated as residential property. Therefore, the bare rental of service apartment is an exempt supply.

However, the lease of furniture and fittings and the provision of services are taxable. GST needs to be charged on these components.

For more information on charging and accounting of GST for residential properties with taxable components, please refer to GST: Guide for Property Owners and Property Holding Companies (PDF, 431KB).