Decoding the Impact of GST Rate on Hotel Bookings
If you are a frequent traveler, you would have noticed that the prices of hotel bookings have increased over the years. No doubt, there are several factors that contribute to this increase, including the Cost of Living Index, rising demand, and the cost of inflation. However, an essential factor that many people overlook is the GST rate.
In this blog post, we will decode the impact of GST rates on hotel bookings and explain how the tax works. We will also examine how these rates have affected the hospitality industry, including hotels and restaurants, in recent years.
Understanding GST
GST, or Goods and Services Tax, is a tax levied on the supply of goods and services in India. Implemented on July 1, 2017, GST replaced many other indirect taxes like value-added tax (VAT), service tax, central excise duty, and entry tax. The tax ranges between 0% on essentials like food and basic healthcare to 28% on luxury goods like cars and cigarettes.
Impact of GST on Hotel Bookings
According to GST rules, hotels with room tariffs below Rs. 1000 per night are exempt from the tax. Those charging between Rs. 1000 to Rs. 2500 attract a 12% GST rate, and those with tariffs above Rs. 2500 come under the 18% GST slab.
The GST rate on food and beverages served in hotels, restaurants, and other establishments is 5% currently. However, if alcohol is consumed on the premises, the tax rate increases to 18%.
As a result of these increased GST rates, hotel tariffs and food bills have gone up. According to industry experts, hotel rates have surged by 7-10% while food bills have seen a 15-18% increase. Moreover, hotels with tariffs between Rs. 2500 to Rs. 7500 often face the brunt of the tax.
Effect of GST on the Hospitality Industry
The GST has affected the hospitality industry in several ways. According to hoteliers, the tax has increased operational costs, resulting in lower profits. Moreover, luxury hotels and five-star resorts have seen a significant decline in bookings, as the increased tariffs have made them more expensive.
On the other hand, budget hotels have seen an increase in bookings, as they fall under the 12% tax slab. Restaurants and cafes that serve alcohol have been hit particularly hard, as customers prefer to avoid the increased tax on their overall bill.
Conclusion
While the GST has streamlined tax administrations and brought about transparency in the hospitality industry, it has also increased the prices of hotel bookings and food bills. The impact has been particularly adverse for luxury hotels and restaurants where prices are already high. However, budget hotels have benefitted from the lower tax slabs. The GST has undoubtedly reshaped the hospitality industry, and only time will tell its long-term effects.
