After the declaration of GST rates with diverse tax slabs across hotel room rates, the Indian hospitality industry is hoping that the government will review a single slab of 18 per cent to create a level playing field, besides providing a boost to tourism.
With room rates above Rs. 5,000 carrying a 28 per cent GST rate, hotel companies are seeking a decrease to restore it to the earlier level when luxury and service tax was about 20 per cent.
Vikas Chadha, Executive Director, Keys Hotels said, “The biggest issue for the hospitality industry has been the high rate of 28 per cent GST for hotels charging room rentals above ₹5,000. Before GST, the luxury and service tax was at about 19 per cent and this has now gone up to 28 per cent. 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.”
Industry players are of the opinion that having a flat slab across the industry is going to work. Vishal Kamat, CEO, Kamat Hotels said, “There should be flat tax as room rates are dynamic and based on demand, and the cost of real estate and labour cost varies across the country. There is already high competition in the industry and these slabs create a regulatory measure, which is not needed. Tourism will be impacted and measures like e-visa will get negated if room rentals above Rs. 5,000 have 28 per cent GST which will have tourists going to Sri Lanka rather than Goa.”
The GST council has pegged GST for AC eateries and those with 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.
“One of the biggest hurdles 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. In contrast, India managed to earn a meagre $94 million,” said Bharat Malkani, past President, HRAWI.
