Different tax slabs are high, complex and uncompetitive, say players
After the announcement of GST rates with different tax slabs across rates for hotel rooms, the hospitality industry is hoping the government will reconsider a single slab of 18 per cent to create a level playing field, apart from giving a boost to tourism.
With room rates above ₹5,000 being slapped with a 28 per cent GST rate, hotel companies are seeking a reduction to bring it back to the earlier level when luxury and service tax was about 20 per cent.
“The biggest issue for the hospitality industry has been the high rate of 28 per cent GST for hotels charging room rentals above ₹5,000. Before GST, the luxury and service tax was at about 19 per cent and this has now gone up to 28 per cent. While GST is a gross tax and there is going to be input credit, the cost for hotel companies goes up by almost 10 per cent and there should be an absolute rate tax,’’ says Vikas Chadha, Executive Director, Keys Hotels.
Considering there is dynamic pricing in the hotel industry like in the case of airlines depending on demand and supply, having a flat slab across the industry is what is going to work, say industry players. “There should beflat tax as room rates are dynamic and based on demand, and the cost of real estate and labour cost varies across the country. There is already high competition in the industry and these slabs create a regulatory measure, which is not needed. Tourism will be impacted and measures like e-visa will get negated if room rentals above ₹5,000 have 28 per cent GST which will have tourists going to Sri Lanka rather than Goa,’’ says Vishal Kamat, CEO, Kamat Hotels.
The GST council has pegged GST for AC eateries and those with liquor licence at 18 per cent, non-air-conditioned restaurants at 12 per cent, hotels charging room rentals between ₹1,000 and ₹2,500 at 12 per cent, ₹2,500 and ₹5,000 at 18 per cent and above ₹5,000 at 28 per cent.
Describing the rates as too complex, high and uncompetitive, the hotel industry has said it will make a representation to the Finance Minister and Tourism Minister to review the rates.
“The Government should realise that while neighbouring countries like Myanmar, Thailand, Singapore, Indonesia and others levy taxes ranging from 5 to 10 per cent, we cannot afford to have this kind of complex and high GST. This is simply not viable. Tourists will simply skip India’’ said Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI).
“At best there should be one or two slabs of either 12 per cent or 18 per cent to create a level playing field. If single slabs can be created for categories like cars and air conditioners, why can’t hotel rooms get clubbed under a single rate,’’ asks Kamat.
“One of the biggest hurdles for the Indian hospitality and tourism industry, in terms of attracting international tourists is that of not having a competitive tax structure. A country as small as Singapore witnesses 10.90 million tourist arrivals against 6.31 million in India. Nations like Malaysia and Thailand attracted 24.7 million and 19.09 million tourists in 2014 and earned foreign exchange of $18,299 million and $26,256 million. In contrast, India managed to earn a meagre $94 million,” said Bharat Malkani, past President, HRAWI.