GST Council may reduce tax on hotel room tariffs

NEW DELHI : The Goods and Services Tax (GST) Council will consider reducing tax on hotel room tariffs ranging between ₹7,500 and ₹10,000 per day from 28% to 18% at its meeting on Friday, but there is no proposal to cut GST on the automobile and real estate sectors, a senior government official said on condition of anonymity.

After several states demanded a reduction of GST on room tariffs to promote tourism, the Fitment Committee has proposed rationalising one of the four slabs pertaining to hotel rooms. The panel discusses requests from various industries for GST reductions

Currently, no GST is charged on room tariffs below ₹1,000 per day. A 12% tax is levied on tariffs above ₹1,000 but below ₹2,500. An 18% tax is levied on room tariffs between ₹2,500 and 7,500. Rroom rents above ₹7,500 fall in the 28% tax slab.

“The move will certainly provide relief to the hospitality industry. However, from a policy standpoint, it’s better to delink the rate with price point of a product or a service,” Pratik Jain, partner & leader of the indirect tax practice at PWC India, said.

“Also 28% category was not initially envisaged for services. Hence there is a case for bringing 28% tax slab for services down to 18%.”

On the automobile and real estate sectors, neither the centre nor state governments are willing to cut GST rates because of the huge revenue implications a reduction would have, the official cited in the first instance said.

It is estimated that implications of a tax reduction from 28% to 18% on automobiles alone would be about ₹60,000 crore, which would also necessitate a reduction of duties on auto components, the official said.

A final call on all these matters will be taken by the GST Council, which is holding its 37th meeting in Goa, the official said.

GST Council is the apex decision-making body on indirect taxes and is chaired by the Union finance minister; it is composed of the finance ministers of states and union territories. Conventionally, all decisions of the council are unanimous.