NEW DELHI: Hospitality industry insiders are expecting better occupancies and growth in the upcoming festive and winter season following the reduction in GST rates on luxury and premium hotels in the country.
The GST Council had on Friday slashed room rates for hotels with tariffs of Rs 7500 and above to 18% from 28% besides rejigging the tax slabs. Hotels with tariffs between Rs 1,001 and Rs 7,500 will attract GST of 12%, while hotels with tariffs of less than Rs 1,000 do not attract a tax as per an earlier decision. Earlier, the slab of Rs 2500-7500 attracted an 18% tax.
Jaideep Dang, managing director of JLL Hotels and Hospitality Group, said the corporate tax will strengthen investor sentiment in the sector while GST rates reduction will improve room night demand in leisure destinations as well as major business cities. According to JLL, the revenue per available room in the sector has grown by 2.6% over the last year.
“It’s a great move particularly for the luxury segment. Companies were looking at hotels with tariffs under Rs 7500 after the 28% GST for corporate bookings. Companies withdrawing from the premium segment and getting into the mid segment will come back,” said Dang.
Mandeep Lamba, president, South Asia at HVS Anarock, said India is now as competitive as other markets in terms of tax slabs.
“This should spur growth for sure. For the first time, the government has looked at hospitality with a slightly different view. No one has really felt the need to rationalise taxation so far. Despite the pressure of a slowdown, the government has looked at hospitality and tourism and has rolled it back, which is a great victory. This shows a shift in the mindset of policy makers — that is critical for the industry,” he said.
Global chains such as Shangri-La and AccorHotels which operate brands like Ibis and Novotel in India also lauded the move.
John Northen, executive vice president, Middle East, India and Indian Ocean, at the Shangri-La Group, said a lower GST rate for the luxury hotel sector will boost revenues and spur demand further among travellers besides increasing the sectors’ contribution to the country’s GDP and foreign exchange.
Jean-Michel Cassé, chief operating officer (COO), India & South Asia at AccorHotels, said the tax cuts will be a major fillip for India’s tourism and hospitality industry.
Pavethra Ponniah, VP and sector head at investment information and credit rating agency ICRA, said the immediate term impact of this rate cut would be a rationalisation of tariffs, particularly in the upper upscale and luxury segments as hotels adjust to the lower rates, potentially stimulating higher demand and consequently occupancies.
“This, to a limited extent, will also narrow the GST rate differential between India and neighboring countries (GST rates of 7-8%) potentially drawing back meeting, incentives, conference and exhibition (MICE) traffic that India was losing out on,” she said.