The government has levied 28 per cent GST on hotels with tariffs of Rs 7,500 and above, a price tag covered by five stars properties.
A week, after the Goods and Service Tax has been rolled out, and the sword of 28 per cent tax hangs over their heads, many luxury hotels are at sea. Apart from fearing that the new slab may put a spanner in the growth wheel, they are also grappling with lack of uniformity in GST for the hospitality industry.
The government has levied 28 per cent GST on hotels with tariffs of Rs 7,500 and above, a price tag covered by five stars properties. Those with less than 1,000 as room rent won't be charged any GST while those charging a rate of 2,500, will be taxed at 12 per cent. Rooms priced between 2500-7500 will be paying 18 per cent GST.
Earlier, hotels charged a host of taxes on bills like Value Added Tax, Service Tax and Luxury Tax, all this has been computed into GST post July 1, clearing confusion for travellers who scratched their heads with so many slabs on the bills, but increasing the worries of luxury properties.
Ankur Bhatia, executive director, Bird Hospitality, says that while he welcomes the move, he is concerned about the impact it is going to have on the sector. "The rate at which we are being charged is certainly a matter of concern for us. We as an industry are at a very nascent stage, and 28 per cent GST won't encourage us to grow in any way," he said. Bhatia added that the government should have given some leeway to luxury properties.
Meanwhile, Rahul Sati, revenue manager, Leela Ambience Convention Hotel, Delhi says, "Before GST a nominal rise and fall in taxes did not that much impact to our overall revenue, or we may say that it has brought us to a breakeven point as far as taxes are concerned. But now there is a displacement of business, where corporate clients have cut down on their events, all of a sudden."
Loss in business is another major factor for hotels. "There will less weekend getaways for the domestic traveller to luxury properties. His will feel, that with the new tax, travelling to Dubai or Hong Kong including airfare will turn out to be cheaper than staying in a five star here," says Bhatia.
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