GST just sounded the death knell for tourism, feel hospitality sector

High GST rates on hospitality will be the "final nail" in the coffin for the sector which is already reeling under demonetization and liquor ban along the highways, according to industry players.

The high incidences of taxes will make India uncompetitive when it comes to tourism as international tourists will skip the country as a destination, they said. Under the GST rates announced today, 5-star hotels will be charged 28% while AC restaurants and those with liquor licence will be taxed at 18%. "The initial reaction is of great despair...28% would be the end of the industry," Federation of Hotels and Restaurants Associations of India (FHRAI) Vice President Garish Oberoi said in a statement.

He further said India's hospitality has already been suffering a lot due to various developments in the recent past. "(After) demonetization, liquor ban on highways, this will be the final nail in the hospitality (sector) coffin," Oberoi said. Expressing similar sentiment, Hotel and Restaurant Association of Western India (HRAWI) past-President Bharat Malkani said: "One of the biggest hurdles for Indian hospitality and tourism, in terms of attracting international tourists is its uncompetitive tax structure".

The government should realise countries like Myanmar, Thailand, Singapore, Indonesia and others levy taxes ranging from 5 to 10%. India cannot afford to have these kind of complex and high GST, HRAWI President Dilip Datwani said. "This is simply not viable. Tourists will simply skip India," he added.

As per rates fixed by the GST Council in its meeting held today at Srinagar, non-AC restaurants will charge 12% GST on food bill. Restaurants with Rs 50 lakh or below turnover will go under the 5% composition. Tax rate for AC restaurants and those with liquor licence will be 18%.

Hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12% while those with tariff of Rs 2,500 to Rs 5,000 would be 18%. GST for hotels with tariff above Rs 5,000 will be 28%. "While we applaud the government's effort to keep GST at 5% for restaurants below 50 lacs and 12% for restaurants without AC. We are disappointed with the high GST slab of 18% for organised restaurants and 28% for 5 star restaurants. This will not go a long way to promote tourism and tourism related jobs", National Restaurant Association of India (NRAI) President Riyaaz Amlani said.

Striking a contrarian note, OYO Founder & CEO Ritesh Agarwal said: "A lower tax rate for budget hotels sector will ensure that the industry's quality upgrade continues while delivering standardised accommodation to millions of middle- class travellers."