How GST will Impact the Hotel and Travel Industry in India

The travel and hotel industries are considered the fastest growing domains in India. Since when GST is implemented, it has subsumed all the indirect taxes into a single tax value to improve the condition by bringing down costs for customers along with businessman.

New GST Rate Applicable on Hotel Industry w.e.f. 01.10.2019. As per notification no 11/2017 (Central Tax Rate)

Transaction Value per Unit (Rs) per day TAX RATE
Upto Rs.1000 Nil
Rs.1001 to Rs.7500 12%
Rs.7501 and above 18%


GST Rates for Hotels Industry (Up to 30.09.2019)

Transaction Value per Unit (Rs) per day TAX RATE
< Rs.1000 Nil
Rs.1000 to < Rs.2500 12%
Rs.2500 to < Rs.7500 18%
Rs.7500 or Above 28%

The low cost of staying in hotel rooms or paying less GST will inspire traveling and make it popular among foreigners along with domestic travelers.

Hospitality and tourism industries show the most care and love but are considered negligible. They pay a very hefty amount of taxes to the Indian government but go through a lack of attention. Now GST has subsumed all the taxes along with the input/ procurement taxes. Earlier the hotel and tourism industries were hit by various taxes across the channel by value-added tax (VAT) to other output service tax.

How the situation has changed so far: The pre and post GST journey

Just as other industries were suffering from being charged multiple taxes, in the same way, hotel and travel industries were also covered by multiple taxes which is now converted in a single duty. Before implementing GST, people used to pay multiple charges such as VAT, luxury tax, and service tax. For example, if a hotel room charges are more than Rs. 1000, they were liable for service tax at 15 %. After that a reduction of 40% was being allowed on the tariff value, thus it brought the service tax down by 9%. The VAT was levied between 12% to 14.5 % besides that luxury tax was also applied above this. However, if we talk about the restaurants there was a 60% reduction by which service tax was reached by 6% on the F&B bills. Tax for bundled services such as social gathering (party, marriage function), were allowed reduction of 30%. Along with that, the cascading effect of VAT was above all where consumers paid tax on tax.

This condition was really very frustrating not only for consumers but also for the owners. To address this issue, the Indian finance minister released GST tax on the hotel and travel industry so that it vanishes out multiple taxes.

How is GST beneficial?

  1. Organizational Ease

The single value tax would nullify several other taxes and will promote a decrease in procedural advances and would bring more opportunities to streamline the tax collection process.

  1. More Clarity for Consumers

It was hard for consumers to differentiate between different taxes such as a value-added tax and an entertainment tax for a common man. However, under the GST regime, it would be easier for customers to get charged by a single tax on their bill.

  1. Availability of Input Tax

Now it would be easier for the travel and hospitality industries to claim and avail input tax credit and availing of full ITC on their input. Before, the implementation of GST, the tax paid on inputs like raw material, cleaning, and supplies, was unable to adjust against the output without any complication. After GST there would be some relief.

  1. Administration ease

Multiple stages along with indirect taxes imposed on the hotels are done away now. This would cut down the burden on the tax system and would result in streamlining the entire process.

GST is a good initiative for the tourism and travel industry. The reduced tax rate and unite taxation system would definitely inspire more tourism and would bring growth in the same domain.


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