Off-sea­son ho­tel room rates may drop af­ter GST changes

HT Estates - - FRONT PAGE - Bidya Sa­pam bidya.s@htlive.com

MUMBAI: Trav­ellers can look for­ward to cheaper ho­tel rooms, es­pe­cially in off-sea­son pe­ri­ods, with the GST Coun­cil grant­ing the in­dus­try’s de­mand to levy tax only on the ac­tual room rate. Un­der the GST regime so far, even when ho­tels of­fered rooms at a dis­count, tax was charged on the orig­i­nal pub­lished room­rate, keep­ing ho­tel bills high. How­ever, the GST Coun­cil has re­fused to con­cede to their other de­mand: to re­duce tax rate on rooms. At present, 28% GST is levied on rooms cost­ing above ₹ 7,500 a day, and 18% for room rates be­tween ₹ 2,500 and ₹ 7,500.

Ex­perts said the change­clears the am­bi­gu­ity and ends a year of heart­burn for hote­liers forced to charge rates at higher de­clared rates even when they were giv­ing out the rooms cheaper.

“There has been a lot of is­sue how the de­clared tar­iff is taken. It also comes dif­fer­ent for dif­fer­ent cus­tomers like cor­po­rates, se­nior ci­ti­zens, etc.,” said Pratik Jain, part­ner and na­tional leader at PwC In­dia.

Jain said the new GST rule would be “hugely ben­e­fi­cial” to cus­tomers and from an over­all tax pol­icy stand­point, “GST should ap­ply on the in­voice value, not on some no­tional value”. Now, cus­tomers mayend up sav­ing around 10% com­pared with the pre­vi­ous regime, he added. Ac­cord­ing to Raj Rana, chief ex­ec­u­tive of­fi­cer (South Asia), Radis­son Ho­tel Group, the over­all cost to the customer would come down and im­prove the af­ford­abil­ity of lux­ury and branded ho­tels. He said ho­tel com­pa­nies have been in a sticky sit­u­a­tion af­ter the de­but of GST last year as room rates turn out ex­pen­sive be­cause of the high tax rate.

“For ex­am­ple, if I have suite which is for ₹ 10,000, the GST ap­pli­ca­ble is 28% but if I’m sell­ing it for less than ₹ 7,500 the customer still had to pay 28% tax in­stead of 18%. So, I was will­ing to cut down­price but with tax the suite was still more ex­pen­sive,” Rana said.

The new norm is likely to at­tract cus­tomers to lux­ury and branded ho­tels “who other­wise may have gone to less ex­pen­sive ho­tels,” he added.

How­ever, some hote­liers be­lieve that though the new GST norm would sim­plify and bring more clar­ity in terms of busi­ness trans­ac­tion, it is un­likely to stim­u­late growth.

Ac­cord­ing to Ankur Bha­tia, ex­ec­u­tive di­rec­tor, Bird Group, a Delhi-based hospi­tal­ity firm GST rate for lux­ury ho­tels should be re­duced and brought to a rea­son­able level to at­tract more cus­tomers. “It is still highly taxed as com­pared to any­where in the world right now,”

MINT/FILE

Trav­ellers can now look for­ward to cheaper ho­tel rooms

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