Branded mid-market and luxury hotels have a reason to cheer because the GST Council on Sunday relaxed the criteria for imposing the goods and services tax (GST) on hotel rooms.
The Council decided that the 28 per cent GST would be imposed on hotel rooms with a tariff of Rs 7,500 above against the previous proposal of Rs 5,000 and above. Rooms with tariffs between Rs 2,500 and Rs 7,500 will attract 18 per cent.
The GST on restaurants in five-star and luxury hotels has been reduced from 28 to 18 per cent, bringing it at par with standalone air-conditioned restaurants. Food & beverages form 30-40 per cent revenue for five-star hotels.
Restaurants and bars at a number of hotels (located within 500 metres of highways) have been hit due to a Supreme Court ban on serving liquor.“The revised GST on rooms and restaurants inside hotels is a favourable move as it reflects the ground realities better. Other than metro cities, most hotels in Tier-II- and -III towns will get a relief on the revised GST for rooms. This is where a lot of domestic travel takes place,” said Raj Rana, chief executive officer (South Asia) at the Carlson Rezidor, which has a network of 85 hotels in India through brands like Radisson and Park Plaza.
In a representation to the finance ministry early this month, the Federation of Hotels and Restaurants Association of India (FHRAI), the apex body of the hotels and restaurants sector, had sought a uniform GST at 12 per cent for the hospitality industry. The delegation requested the government to take a fresh look at the luxury tax limit of Rs 5,000 and enhance it suitably as is followed in most countries of the world.