It’s good news for travellers and anyone who requires a hotel stay, as accommodation is set to get cheaper after a crucial tweak in rules by the Goods and Services Council last week. The council on Saturday decided that the GST on accommodation service will be chargeable on ‘transaction value’, rather than the ‘declared tariff’, which means that customers will now save additional tax if hotels offer discounts.
Different GST slabs are levied on different accommodation prices. Under the GST regime, for tariff up to Rs 999, there is no tax. For tariff from Rs 1,000 to Rs 2,499, the GST rate is 12%; from Rs 2,500 up to Rs 7,499, the GST is 18%; from Rs 7,500 and above, the GST rate is 28%.
Under the previous rule, the GST was charged on the declared tariff. For example, if a hotel room’s declared tariff is Rs 10,000, it would fall under the highest tax slab of 28%. If a customer were to book that room at a discounted rate of Rs 7,000, the person would have to pay 28% tax on the booking amount.
Now under the new rule, the customer will pay tax on transaction value, which will be 18% on Rs 7,000 as it falls under 18% tax bracket, Garish Oberoi, president, Federation of Hotel and Restaurant Associations of India (FHRAI) explained.
|Rate||Rs 10,000||Rate||Rs 10,000|
|Discount||Rs 3,000||Discount||Rs 3,000|
|Booking||Rs 7,000||Booking||Rs 7,000|
|GST @28% on Rs 7,000||Rs 1,960||GST @18% on Rs 7,000||Rs 1,260|
|Total||Rs 8,960||Total||Rs 8,260|
Earlier GST levy on declared tariff was causing confusion among customers. The declared tariff or the rack rates get defined by peak-season dynamics, which made payable tax higher even if hotels were providing accommodation services at a discount throughout the year. Analysts say that the new GST rules will make the luxury stay more accessible for the middle-class and increase competitiveness among hotel businesses.
“An approximate ranging between 10% to 30% or even higher benefit could accrue to the consumer (corporates/ individual) on GST paid for availing such accommodation services (subject to slabs of tax rates being defined for transaction value),” Jigar Doshi, Indirect Tax Partner, SKP Business told FE Online.
However, there could be a caveat. In case of discounted price, customers stand to benefit but there could be some cases where they might end up paying more. If a customer booked a room of Rs 7,000 and availed an extra bed of Rs 1,000, it makes the total tariff Rs 8,000. Since under previous rule, the GST was levied on the declared tariff of Rs 7,000, which would be 18%. However, now the GST will be on the entire transaction value of Rs 8,000, which will be 28%, Ritul Patwa, CA told FE Online.
The GST Council said that the new rules will come in force after the government issues an official notification. Besides the change in GST rules for accommodation services, the council also cut taxes on over 100 items including white goods.
Source : Financial Express