GST Rate on Hotel Rooms, Relevant issues on Hotel Room Tariff

GST Rate on Hotel Rooms: Rate of GST on hotel rooms is as below…Hospitality is not only a high foreign exchange grosser; it is also among the largest tax generators. There are multiple taxes charged on the same Service/ Product offering by the Central as well as State Governments. It is an understanding that the Taxes levied on Inbound Tourism is amongst the highest in the country, and this is one of the major reasons for India losing Foreign Tourists to competing South East Asian Countries. check out GST Rate on Hotel Rooms from below…

GST Rate on Hotel Rooms

Note – GST is charged based on the Declared Room Tariff which is explained as below:

“declared tariff includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.”

I) RATE OF GST – Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes:-

  • Declared Room Tariff upto Rs. 999/-: GST @ NIL [Remark – No ITC Credit]
  • Declared Room Tariff from Rs. 1000/- upto Rs. 2499/- : GST @ 12% [ITC Credit allowed]
  • Declared Room Tariff from Rs. 2500/- upto Rs. 7499/- : GST @ 18% [ITC Credit allowed]
  • Declared Room Tariff from Rs. 7500/- and above: GST @ 28% [ITC Credit allowed]

[NOTE: GST Rate is decided on the basis of Declared Room Tariff but the tax is chargeable only on the actual amount charged from the customer/ guest]

Relevant issues on Hotel Room Tariff

1: Will GST be charged on actual tariff or declared tariff for accommodation services?

Declared or published Tariff is relevant only for determining of the Tax Rate Slab. GST will be payable on actual amount charged (transaction value)

2: What will be the GST rate if cost goes up (more than declared tariff) owing to additional bed?

GST Rate would be determined according to declared tariff for the room, and GST at the rate so determined would be levied on the entire amount charged from the customer. For example, if the declared tariff is Rs. 7000/- per unit per day but the amount charged from the customer on account of extra bed Rs. 8000/-. GST Shall be charged @ 18% on Rs. 8000/-.

3: Where will the declared tariff be published?

Tariff declared anywhere, say on the website through which business is being procured or printed on tariff card or displayed at the reception will be declared tariff. In case different tariff is declared at different places, highest of such declared tariff shall be the declared tariff for the purpose of levy of GST.

4: Same room may have different room tariff at different times depending on season or flow of tourist as per dynamic pricing. Which rate to be used then?

In case of different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.

5: If Tariff Changes between booking and actual usage, which rate will be used?

Declared Tariff at the time of supply of the service would apply.

6: GST at what rate would be levied if an upgrade is provided to the customers as a lower rate?

If declared tariff of the accommodation provided by way of upgrade is Rs. 10000/-, but the amount charged is Rs. 7000/-, then GST would be levied @ 28% on Rs. 7000/-.

The impact of GST on the hospitality and tourism sector. Review of the status as to how GST will impact the overall hospitality and tourism sector:

  • Easier administration and procedures
  • By subsuming multiple taxes under a single category, GST will abolish the tax-on-tax structure, reduce the complexity of taxation procedures and streamline it.
  • Simplicity for consumers
  • Most average consumers cannot distinguish between multiple taxes and rates. With the GST regime, consumers will have a more comprehensible and transparent tax structure with only a single charge on their bill.
  • Greater technological burden

Among the pros of GST, there are also a few cons that are hard to overlook. One of them is increased burden on service providers to employ technologybased tools for taxation procedures.

While the guidelines on managing accounts and filing returns are well-defined, it will require businesses to become technologically adept, increasing the burden and cost of compliance

  • Increased Costs
  • Businesses will increasingly look to recover the additional technology costs from their customers, which may lead to higher tariffs. 3. Lack of competitiveness with other Asian countries

While, GST will make India a bigger player in the global hospitality and tourism industry, there is no global competitiveness in tax rates. Other Asian countries such as Japan and Singapore have much lower tax rates in the hospitality sector (8% and 7% respectively) which is amongst the top reasons why tourists prefer to visit these countries and others such as Malaysia, Thailand, etc

While the sector remains divided on the predicted impact of Goods and Services Tax, most players in the industry have welcomed the move to the new tax regime with great enthusiasm. The long-term impact, however, remains to be seen and only time will tell how and if GST does accelerate growth in the sector.

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