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GST platter

The Hotel and Hospitality industry, like every other sector in the Indian economy, pays multiple taxes (VAT, luxury tax, and service tax) in the existing indirect tax regime. Hoteliers and hospitality businesses do not get any input tax credit on the taxes they pay currently, as central taxes cannot be set off against state taxes (VAT) and vice-versa.

Impact of GST on Hotel and Hospitality Industries

1.Hotel Rooms:
Under the Current scenario  there are two taxes levied on hotel rooms (Room Rent exceeds Rs.1000) i.e. 10% Luxury tax and service tax of 9% . So the total tax paid is 19%. The expected tax rate under GST would 18% (1% reduce).
2.Food &Beverages in Restaurant :
Currently the Vat under F&B segment is 12.5% and Service Tax of 6%. So the total tax paid is 18.5% . The expected tax rate under GST would be 18%(0.50% reduce).
Currently the Luxury Tax is 3% and Service Tax of 10.5%, Vat is 12.5%. The total tax paid is 26% . The expected tax rate under GST would be 18%(8% reduce).

Besides, above the most important benefit under GST would be that currently the Hotel and Hospitality Industry was not able to get full credit on many items. But under GST regime the full credit will be available. This will increase profitability of the industry.

The Hotel and Restaurant Association of Western India has been lobbying for a GST rate of 5% as it believes that a lower rate will bring in more tourists and allow Indian businesses to compete with global chains. The Tourism and Hospitality industry in India is expected to grow to US$ 280.5 billion by 2026, and the initial hiccups after GST implementation are highly unlikely to impede this growth. However, it remains to be seen whether the cons outweigh the pros for this sector.

In the meantime, if you have travel plans post July, our bet is you will not have to backpack to save money – the three star hotel you had your heart set on might just become affordable!


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