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In a major relief to the hospitality sector, the Goods and Service Tax (GST) rate will now be charged on the transaction value rather than on the declared tariff in hotels. Industry experts have hailed the decision.
The move will ensure lower tax rates when consumers pay lower amount than the published charges, effectively lowering the total payout. “This is a welcome move and the Hotel and Restaurant Association of Western India (HRAWI) thanks the government for considering our request and bringing the much needed reform. Applying GST rate on the declared tariff was incorrect and caused confusion for guests,” said Dilip Datwani, President, HRAWI.
Earlier, the GST was levied on the published tariffs or the declared tariffs on hotel rooms. But hotels often come up with discounts on room tariffs for their customers. Lower room tariffs would correspond to a different GST rate as per the prescribed rate slabs.
“So, for instance, if declared tariff on a room stay is ₹8,000 and the stay is charged at ₹5,000, hotels are required to levy a GST of 28 per cent instead of 18 per cent. This is unfair and it increases the tax burden drastically. Hence, we had suggested that the customer be levied a GST based on the actual tariff to avoid any ambiguities in interpretation and disputes,” added Datwani.
As per the rules, 18 per cent GST is applicable for room tariffs ranging between ₹2,500 and ₹7,500 while tariffs of ₹7,500 and above attract 28 per cent GST.
Ramesh Ramanathan, Managing Director, Sterling Holiday Resorts, said, “It is a good decision for the hospitality industry. However, we need more details on it”.
Rishi Puri, Vice-President, Lords Hotels and Resorts, said: “Hotels these days operate on dynamic pricing and the room tariffs vary depending on seasons and also based on occupancy. Business tourists receive Input Tax Credit (ITC) against GST for their stays in hotels. However, it is the leisure and other segment travellers who have to bear that cost. At many of our leisure properties, the tariffs either get discounted or even demand a premium based on the season. The change will certainly lessen the GST burden on the customer and is a positive development for the hospitality industry.”
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