The Hotel and Restaurant Association of Western India (HRAWI) has welcomed the revised GST slab on hotel room tariffs that effectively widens the tax slab of 18 per cent to tariffs ranging between Rs.2500 and Rs.7500 instead of the previous upper limit of Rs.5000.
With the revision, the highest tax rate of 28 per cent is assigned to tariffs of Rs.7500 and above. Although the hotel industry was hoping for a more competitive and simpler GST, it has welcomed the partial relief. Along with the revision in the slabs for room tariffs, the tax rate for air-conditioned restaurants including restaurants in 5 star hotels will have GST at 18 per cent, effective July 1, 2017.
“This is unarguably a welcome revision. But, if India has to remain competitive as a tourist destination, this may just not cut the ice. While neighbouring countries pay 5 to 12% GST or equivalent tax, hotels in India would be levying 18 and 28% GST. This may not augur well with foreign inbound tourists who are lured with significant deals and sops by our neighbours. We should remember that we are living in a very competitive world, and tourists today have a lot of choices,” says Dilip Datwani, President, HRAWI.
It has been HRAWI’s contention that tourism is the one industry that has unlimited potential for job creation and forex earnings. With a more pragmatic taxation policy, the exchequer could stand to earn three times current earnings by increasing the base.
“So while the revision will provide hotels and restaurants some relief, we believe that the GST continues to be unviable even now. India needs to be not just promoted as a tourism destination but also needs to offer value for money to tourists. With countries around us levying taxes that are effectively half of our GST rates, in the long term the tourist inflow is bound to suffer. We are still hopeful that the Government reconsiders the GST for hospitality after they asses the results on the sector, post the roll out,” he concludes.
