Hotels seek clarity on applicability of new tax on their rates

No clarity if GST will apply on published ones for rooms or price at which it is sold to consumers

The domestic hotel sector, which follows a dynamic pricing policy to sell rooms and offer discounts from time to time, is not clear whether the goods and services tax (GST) rates will apply on published rates of rooms or that at which it is sold to consumers.

 

“Room rates are dynamic and have an element of seasonality. Ideally, tax should be chargeable on the rate at which consumption takes place. We hope the industry associations will get clarity from the authorities,” said Raj Rana, chief executive officer (South Asia) at Carlson Rezidor, which operates hotels under brands Radisson and Park Plaza.

 

Under the existing taxation system, a customer pays taxes on the actual rate charged, which is often lower than the published rates. In certain international markets, tax gets levied on the published tariffs though sales might be at a lower price. Rattan Keswani, deputy managing director, Lemon Tree Hotels, said the company is looking forward to more clarity on the issue.

 

Rana said some Indian cities such as New Delhi and Hyderabad charge luxury tax on published rates. In case of Delhi, this is levied on published tariffs while service tax is imposed on the consumption price.

 

Rahul Pandit, managing director and chief executive officer at Ginger Hotels, said the current norm in most states provide for taxes on actual tariff paid. “We need to get clarity on this but the understanding is that it should get levied on the applied rate and not the published rate,” said Pandit.

 

Rana is also worried about the imposition of 28 per cent GST on hotel tariffs above Rs 5,000. He said it would be a challenge to attract visitors from abroad as India competes with several other destinations, which could be more competitive on prices. For such luxury hotels, the international clientele forms a large part of bookings.

 

Restaurants housed inside five-star hotels will now have to pay GST of 28 per cent against the rate of 18 per cent by standalone air conditioned restaurants. Along with the recent ban that restricts highway hotels from serving alcohol, the GST decisions could put businesses in substantial hardship, explained Rana.