“Lower taxes on rooms and dining could make the industry more competitive and help retain domestic tourists who opt for lower cost neighbouring countries,” said Arjun Baljee, president of Royal Orchid Hotels, alluding to South East Asian markets that are increasingly attracting tourists from international markets, including India.
Hotel rooms below Rs 1,000 are currently GST-exempt, but most branded hotels face 12 per cent tax for tariffs between Rs 1,000 and Rs 7,000 or 18 per cent on tariffs upwards of Rs 7,500. Restaurants face a 5 per cent tax rate without input tax credit. Shifting inputs like food and supplies (now 12%) to a lower merit rate could cut costs. The finance ministry has reportedly proposed 5 and 18 per cent slabs instead of five rates currently— nil, 5 per cent, 12 per cent, 18 per cent, and 28 per cent.
“This would be highly beneficial, and particularly since there is a tariff threat to our exports to the US, this should help us offset that impact to some extent,” said Ravi Gosain, president of IATO.
“While tour services are in the 5 per cent bracket, hotels are in the 18 per cent, over which, we pay 5 per cent GST," said Rajiv Mehra, general secretary at the Federation of Associations in Indian Tourism and Hospitality (FAITH), while adding that the government should work on providing input tax credit to the industry.
Realty is expected to get a boost from the GST reset, which will add to the rate cuts of 100 basis points done by the RBI since January this year, industry executives said.
“Key inputs like steel, cement, tiles, and other materials are taxed at higher rates under multiple slabs. If these are brought down in a rationalised two-slab structure, it may help reduce costs and improve margins,” said Sunil Pareek, executive director at Bengaluru-based Assetz, adding that return of input tax credit can make GST neutral and benefit both developers and homebuyers.
Ashwinder Singh, vice chairman at BCD Group and chairman of the CII Real Estate Committee, said that given the sector can experience slow flows due to issues such as litigation and ambiguity, a clean GST regime can accelerate the pace of capital and consumer movement. “It won’t fix structural challenges overnight. But it restores something far more powerful: belief that course corrections are still possible in Indian policy,” he said.
Rajjath Goel, managing director at MRG Group said that the move will boost festive demand, helping industry drive stronger sales from Diwali onwards. “Rationalisation will bring transparency, ease of doing business, and renewed confidence among homebuyers,” he said.
The move will also provide much-needed relief to MSMEs by lowering operational costs and improving cash flow, thereby enhancing their competitiveness, and enabling smaller businesses to expand further, said Manas Mehrotra, founder, 315Work Avenue. “It will also stimulate demand across sectors, giving a boost to the broader economy.”
The steps will encourage more entrepreneurs to enter the formal economy and will enhance ease of doing business across the country, he added.
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