GST Council lowers tax rate on hotel tariffs

Ibis Kolkata

The GST Council, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and Union Territories, met today in Goa. The GST Council has agreed to lower tax rates imposed on the hotel industry. The 37th meeting of the GST Council has decided to tax hotels with room tariff of Rs 7,500 and above at 18 per cent instead of the earlier 28 per cent. Hotels with tariffs in the range of Rs 1,000 to Rs 7,500 will have to pay GST at a rate of 12 per cent. Lastly, hotels with tariffs below Rs 1,000 have been exempted from paying taxes under the GST regime, according to sources.

The move to reduce GST came in the wake of the resolution tabled at the recently concluded Tourism Ministers’ conclave 2019 held at Kovalam in Kerala. The Tourism Minsters from different states made a strong case for reduction, simplification and rationalization of various taxes and levies, including Goods and Services Tax (GST), in tourism and travel industry to attract tourists and cushion stiff global competition.

“The Tourism Ministers’ conclave 2019 at Kovalam, Kerala notes with concern that the GST Council of India has imposed 28 per cent GST on hotel room tariff over Rs 7,500 and 18 per cent tax on rooms with tariffs between Rs 2,500 and Rs 7,500. This tax rate is high compared with other countries,” said a resolution unanimously adopted by the conclave. The resolution, moved by Karnataka Tourism Minister C T Ravi, said reduction in GST in hotel rooms is essential to attract more tourists. The resolution also sought measures to reduce high airfares which posed tough competition from other global destinations. “We express concern over the high airfares during peak season and festival periods, which are forcing holiday-makers to opt for economical destinations. Besides, unexpected closure of certain airlines/carriers has led to increased airfares while minimal air connectivity with 2-tier and 3-tier cities has only compounded the problem,” it stated.

Association of Tourism Trade Organizations, India has welcomed the GST Council’s move to reduce tax on hotel tariffs. “We welcome the reduction of GST as it will help attract more tourists to Indian destinations and help the tourism entrepreneurs. The government is lately showing very clear intentions in promoting the tourism industry and the reduction in GST on hotel tariffs is one such measure in line with the series of actions taken by the government in the last couple of years. It will go a long way in promoting tourism in India and making our destinations traveller-friendly,” said Vinod C S, President, ATTOI.

The GST Council has also agreed to lower tax rates on outdoor catering to 5 per cent, with the option to avail input tax credit.

The GST Council has also decided to increase the tax rate for caffeinated drinks to 28 per cent from 18 per cent. An additional 12 per cent cess would also be imposed on such beverages.

The recommendations of the GST Council will be implemented from October 1, 2019.