Tax on actual tariffs to enhance yields and occupancies post GST relief: Hotel companies
he hospitality industry has lauded the GST Council’s decision to levy goods and services tax on actual tariff charged to customers for hotel rooms instead of declared tariffs and said it will help in improving occupancies and yields.
“This is a very good and progressive step,” said Sushil Gupta, chairman of Asian Hotels (West) that owns JW Marriott hotel in Aero City in Delhi and Hyatt Regency Mumbai.
The decision is a big relief particularly for premium hotels because for so long they were forced to charge 28% GST even when they used to offer discounts to customers to price rooms at less than Rs 7,500. GST on rooms with tariffs of Rs 7,500 and above is 28%, while rooms with Rs 2,500-7,500 tariffs attract 18% GST.
Also, if their declared peak season tariff crossed Rs 7,500, then they had to pay 28% GST through the year even if the declared tariff is less than Rs 7,500 in other seasons. “Earlier if your tariff was Rs 6,000, for instance, and in winters it went up to Rs 8,000 or Rs 9,000…you would come in the category of 28% all through the year,” Gupta said. “That was regressive. That anomaly is over now.”
Tourism ministry officials and industry associations had been suggesting and lobbying for these changes for a while, arguing that applying GST on declared tariffs was incorrect and caused confusion.
Tourism ministry officials said it was a landmark decision by the GST Council and would make the business much more rational and easier.
Aashish Gupta, consulting CEO of apex industry body Federation of Associations in Indian Tourism and Hospitality (FAITH), said the concept of published or declared tariff has become redundant with demand-supply changing in real time.
“We had explained it to the revenue secretary earlier that given the seasonality, the declared tariff could change any number of times,” he said. “The demand supply situation can change within hours. If the declared tariff was Rs 10,000 because of the real time it could go down to Rs 7,000 in a month. But levying a 28% notional rate on customers even on Rs 7,000 was unfair,” he said.
FAITH had also called for lowering of the 28% tax, allowing the tourism industry to avail IGST credits, and exempting outbound tourism services from GST. “Rs 7,500 is not luxury by any standard. We hope the GST rates are aligned to the previous industry average of 20-21% as per the principle of equivalence. Indirect taxation should gradually move towards the global average. We are hopeful that the GST Council will also make the necessary amendments for these other recommendations,” said Gupta.
ET had reported in its edition dated December 9, 2017 that applying GST on declared tariffs was causing confusion among travellers as hoteliers said the term “declared tariff” was vague and unclear as hotels could declare and publish new seasonal tariffs several times a year and hotel rates may vary significantly with each season.
Hotel and Restaurant Association of Western India (HRAWI) thanked the government for considering its request.