GST on luxury hotels

28% GST on luxury hotels likely to stay

NEW DELHI:  Officials familiar with the matter told ET, “The 28% GST on luxury hotels with tariffs of Rs 7500 and above is likely to stay despite the hotel industry lobbying to reduce the tax rate as the govt is unlikely to amend the tax slab now”.

The 28% GST on luxury hotels with tariffs of Rs 7500 and above makes India one of the world’s largest taxpayers for hotels, but the government believes that slab is applicable to very few hotels in the country.

“It is affecting less than 10% of the hotel supply. In other hotel categories, the tax rates have been reduced by about 2-3% across states. So hoteliers in other categories are not complaining. Unless revenue stabilises from GST, they are not going to make a case to reduce it. Before the general elections, is it unlikely that they will look at something contentious like reduction in the tax rates for luxury hotels,” said a government official familiar with the developments.

A government official familiar with the developments said  “It is affecting less than 10% of the hotel’s supply. In other hotel categories, the tax rates in states have decreased by about 2-3% across states. So hoteliers in other categories are not complaining.Unless revenue stabilises from GST, they are not going to make a case to reduce it. Before the general elections, is it unlikely that they will look at something contentious like reduction in the tax rates for luxury hotels”.

The GST council had revised GST tax slabs in the hospitality sector in June last year.

The 28% tax slab threshold, which was earlier applicable to hotels with tariffs of Rs 5,000 and above, was revised to apply to hotels with tariffs of Rs 7,500 and above. Hotels with tariffs between Rs 2,500-7,500 are charged 18%.

According to the research firm HVS, the primary GST rate of 28% on hotels would have made Star category hotels the most in the world in Indian cities, which would cross those people in New York, London and Paris, excluding add-on levies such as municipal tax and service charge.

HVS had said “If one were to put aside other costs on an ‘apples to apples’ comparison, not a single state was levying such a high tax on its guests as it will now be the case with this new tax regime”.

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