GST may be a non-discriminatory tax, and its impact is going to be seen across verticals. In this article, we’ll inspect the results of the GST on the hospitality industry and commercial enterprise business. The Indian hospitality industry and commercial enterprise business, that was pegged at US$ 136.2 billion at the tip of 2016, is one in every of the sectors which can see major changes post-July 2017. GST Consultants in Chennai observe that the implementation of GST can facilitate the arena by reducing prices for purchasers, harmonizing taxes, and reducing business dealings prices, however will have its own set of challenges.

Pre and Post GST: How truth has modified

The hospitality industry business, like each different sector within the Indian economy, was susceptible to pay multiple taxes (VAT, luxury tax, and repair tax) beneath the previous VAT regime. A hotel where tariff exceeded INR 1,000, was chargeable for service tax at 15%. An abatement of 40% was allowed on the tariff worth, so transferal the effective rate of service tax right down to Sep 11. The VAT (ranging between 12% to 14.5%) and luxury tax, would apply on prime of this. However, for restaurants, there was an hour abatement that meant that the service tax was charged at an efficient rate of 6% on the F&B bills, except for VAT (12 % to14.5%). Bills for bundled services like social functions (seminars, wedding etc.), were taxed with an abatement of half-hour. The cascading impact of the VAT regime where the tip client paid a tax on tax, will increase the tip price. Hoteliers and hospitality industry businesses didn’t get any input decrease on the taxes they paid, as central taxes like service tax, couldn’t go off against state taxes (VAT) and vice-versa.

Under the GST Regime

Under the Goods and Services Tax, the hospitality industry sector stands to reap the advantages of standardized and uniform tax rates, and straightforward and higher utilization of input decreases. Because the final price to end users decreases, we are able to expect the business to draw in additional overseas tourists than before. This could ideally end in improved revenues for the government and there are several profits to the present new tax regime that might facilitate the industry’s growth within the long-standing time. For example, complimentary food (like breakfast) was taxed severally beneath VAT, however, currently, it’ll be taxed beneath GST as a bundled service as per a GST Consultant in Chennai.

GST Rates for Hotels based on Room Tariff (with effect from 01.10.2019)
Tariff/NightGST Rate
< INR 1,000No Tax
INR 1,001 -7,50012%
= or > INR 7,50118%
GST Rates applicable for Hotel Industry
GST Rates for Hotels based on Room Tariff (Up to 30.09.2019)
Tariff per NightGST Rate
< INR 1,000No Tax
INR 1,000 -2,499.9912%
INR 2,500 -7,499.9918%
= or > INR 7,50028%
GST Rates applicable for Hotel Industry

The benefits of GST

  1. Administrative Ease

GST can get rid of many different taxes, resulting in a discount in procedural steps and additional possibilities to contour the taxation method.

  1. Clarity for customers

It was typically tough to differentiate between a VAT and an entertainment tax for the general public. However, beneath the GST regime customers can see solely one charge on their bill and it’d provide them a transparent image of the tax they’re paying.

  1. Improved Quality of Service

How many times have you ever had to attend within the hotel lobby, speculative if you’d miss your flight back home as a result of your bill still being prepared? With only 1 tax to reckon, the checking-out method at hotels and restaurants can currently become easier – another perk that the hospitality industry business will brag regarding.

  1. Availability of Input Tax

The commercial enterprise and hospitality industry business can notice it easier to assert and ITC and can get full ITC on their inputs. Before GST, the tax paid on inputs (raw edibles for food, improvement provided etc.) couldn’t be adjusted against the output with no complications. However, this can become easier within the GST regime.

The disadvantages of GST

  1. Increased Technological Burden

When the service tax was initially introduced, there have been heaps of combine ups. GST, thankfully, has terribly clear pointers on how every business has to manage their accounts and file returns however it’ll need businesses to become technologically adept, increasing the technological burden and price for compliance.

  1. Increased prices

In Maharashtra, for example, hotel rooms were earlier taxed at 19% and food at 18.5%. Even with GST charged at 18%, there is solely a marginal price reduction in each case. Businesses will look to recover the extra price of technology and new systems from their customers, which could – in some instances – cause higher tariffs.

  1. Lack of Parity with Asian Counterparts

As India becomes a good larger player within the world hospitality industry and commercial enterprise business, we’d like services to be at par with world rates. Our Asian neighbors like Japan and Singapore have terribly low tax rates for his or her hospitality industry sector (8% and 7% respectively) that is a very important reason for them ranking high on traveler wish lists. India may be a world commercial enterprise hotspot, however it still loses out on the tramp crowd because of these high rates.


GST may be an accumulation of higher and easier rules and laws, and inflated prices and compliances. The Hotel and Restaurant Association of Western India had been lobbying for a GST rate of 5% because it believed that a lower rate can usher in additional tourists and permit Indian businesses to contend with world chains. However, the GST Council deemed it suited to set the rate at 18%. The Tourism and Hospitality industry business in India is predicted to grow to US$ 280.5 billion by 2026, and therefore the initial hiccups once GST implementation is extremely unlikely to impede this growth. However, it remains to be seen whether or not the cons outweigh the pros for this sector.