Hospitality industry wants tax slab of 18% after the announcement of GST

After the announcement of GST rates with different tax rates for hotel rooms, the hospitality industry is hoping the government will reconsider a single slab of 18 per cent to create a level playing field, apart from giving a boost to tourism.

With room rates above Rs 5,000 being slapped with a 28 percent GST rate, hotel companies are seeking a reduction to bring it back.

The earlier level luxury and service tax was about 20 per cent.

“The biggest issue for the hospitality industry has been the high rate of 28 per cent GST for hotels charging room rentals above Rs 5,000. Before GST, the luxury and service tax was at about 19 per cent and this has now gone up to 28 percent. While GST is a gross tax and there is going to be input credit, the cost for hotel companies goes up by almost 10 per cent and there should be an absolute rate tax,’’ says Vikas Chadha, Executive Director, Keys Hotels.

The GST council has pegged GST for AC eateries and those with the liquor licence at 18 per cent, non-air-conditioned restaurants at 12 per cent, hotels charging room rentals between Rs 1,000 and Rs 2,500 at 12 per cent, Rs 2,500 and Rs 5,000 at 18 per cent and above Rs 5,000 at 28 per cent.

Describing the rates as too complex, high and uncompetitive, the hotel industry has said it will make a representation to the Finance Minister and Tourism Minister to review the rates.

“The Government should realise that while neighbouring countries like Myanmar, Thailand, Singapore, Indonesia and others levy taxes ranging from 5 to 10 percent, we cannot afford to have this kind of complex and high GST. This is simply not viable. Tourists will simply skip India’’ said Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI).

One of the biggest problems for the Indian hospitality and tourism industry, in terms of attracting international tourists, is that of not having a competitive tax structure. A country as small as Singapore witnesses 10.90 million tourist arrivals against 6.31 million in India.

Nations like Malaysia and Thailand attracted 24.7 million and 19.09 million tourists in 2014 and earned foreign exchange of $18,299 million and $26,256 million. India only managed to earn $94 million