1.
How GST implementation will have a
impact on hospitality sector

2.
 Hospitality Industry in India, a big contributor to
the country’s economic growth is on high growth
trajectory and is expected to reach Rs 2796.9
thousand crores by 2022.
 The industry also contributes significantly to
employment, FDI and Foreign exchange.
 Recently the industry has already been severely
impacted by the Supreme Court liquor ban and the
much awaited Goods and Services Tax (GST) rates
has come as another shocker.

3.
Current Situation
 The hospitality industry, like every other sector
in the Indian economy, pays multiple taxes (VAT,
luxury tax, and service tax) in the existing
indirect tax regime.
 A hotel where the room tariff exceeds Rs 1,000 is
liable for service tax at 15 %.
 An abatement of 40% is allowed on the tariff
value bringing the effective rate of service tax
down to 9%.

4.
 The Value Added Tax (ranging between 12 % to
14.5 %) and luxury tax will still apply.
 However, for restaurants there is 60% abatement
which means that the service tax is charged at an
effective rate of 6% on the F&B bills, apart from
VAT (12 % to 14.5%).
 Bills for bundled services like social functions
(seminars, marriage etc.), are taxed with an
abatement of 30%.

5.
 The cascading effect of the existing indirect tax
regime where the end consumer pays a tax on
tax, increases the end cost.
 Hoteliers and hospitality businesses do not get
any input tax credit on the taxes they pay
currently, as central taxes cannot be set off
against state taxes (VAT) and vice-versa.

6.
Present GST System
 The tourism and hospitality industry in India
recently got updated with a new set of Goods and
Services Tax (GST) rates that will be rolled out
from July 1.
 It will be applied on their services based on the
tariffs and turnover they draw, the GST council
has finalised.

7.
 While budget hotels i.e. those with INR 1,000 a
day for rooms, will attract low or even nil tax
rates, those charging INR 5,000 and more room
tariff per day will have to pay 28 pc GST.
 Currently lower budget hotels make up about 80
pc of the hospitality market in India.
 The new rates will come into effect from July 1.

8.
GST Rates
 The GST on hotels and lodges which charge
between Rs 1,000 and Rs 2,500 will be 12 %.
 While, the GST on hotel rooms in the price range
of Rs 2,500-Rs 5,000 will be 18 %.
 For lodges and hotels cheaper than Rs 1,000, the
GST is set at 5 %.

9.
 Restaurants with a turnover of less than Rs 50
lakh will be levied a tax rate of 5 per cent.
 Non-ac restaurants will have a 12% tax rate.
 AC restaurants will have to shell out 18% tax.

10.
 As the final cost to end user decreases, we can
expect the industry to attract more overseas
tourists as compared to our neighbours.
 Today when most of the Indian restaurants and
hotels are contributing to country’s economy as
well as to the employment sector.
 GST will definitely have an impact the sector be it
a small or large scale business.

11.
 Qualifying the sector for the lower tax slab would
have helped to the employment generator sector,
diners and tourists.

12.
Positive Impact
Administrative Ease:
 GST will abolish several other taxes, leading to a
reduction in procedural steps and more chances
to streamline the taxation process.
Clarity for Consumers:
 It is still very difficult to differentiate between a
Value Added Tax and an entertainment tax for
the common man.

13.
 However, under the GST regime customers will see
only a single charge on their bill and it would give
them a clear picture of the tax they are paying.
Improved Quality of Service:
 With just one tax to compute, the checking out
process at hotels and restaurants will now become
easier – another perk that the hospitality industry
can brag about.

14.
Negative Impact
Increased Technological Burden:
 GST has very clear guidelines on how each industry
needs to manage their accounts and file returns
but it will require businesses to become
technologically adept, increasing the technological
burden and cost for compliance.

15.
Lack of Parity with Asian
Counterparts:
 Our Asian neighbours such as Japan and
Singapore have very low tax rates for their
hospitality sector (8% and 7% respectively)
which is an important reason for them ranking
high on tourist wishlists.

16.
Industry Views
 “Levying 28 pc on luxury and five-star hotels is
myopic,” Achin Khanna, managing director,
consulting and valuation practice, at consulting
firm HVS told the Indian press.
 “Hotels charging more than INR 5,000 do not
automatically mean they are a luxury hotel or
catering to want based travel,” Khanna
commented while also saying that the move will
also impact end customers.

17.
 “The government has not realised the
importance of providing impetus to hospitality
and tourism sectors, which are one of the highest
employment generating sectors,” Riyaaz Amlani,
president of National Restaurant Association of
India said to an Indian daily.
 Amlani of National Restaurant Association of
India said heavy taxation and regulation would
only lead to “leakages” in government revenues.

18.
Source
 http://www.thehindu.com/news/cities/Visakhapatnam/gst-rates-will-impact-
hospitality-sector/article18664042.ece
 http://mediaindia.eu/indian-travel-trade/gst-rates-on-hospitality-and-tourism-
industry/
 http://www.financialexpress.com/money/how-gst-will-impact-hospitality-
industry/609363/
 http://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/gst-
rate-on-top-hotels-restaurants-upset-hospitality-tourism-
industries/articleshow/58757234.cms
 http://www.hotelierindia.com/impact-of-gst-on-india-hospitality-industry/
 http://www.businesstoday.in/current/corporate/gst-tax-rates-will-affect-your-
restaurant-bill/story/252551.html
 http://hhd.psu.edu/media/overview/callout-images/Fairmont_Lobby_WEB.jpg
 http://www.thehindubusinessline.com/multimedia/dynamic/03167/BL24_P6_HOT
EL_3167552g.jpg
 http://images.financialexpress.com/2017/05/hospitality.jpg

19.
Thank You
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