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May, 20 2017

​GST makes staying at five-star, dining out more expensive

Under the new GST scheme, low-budget and non AC restaurants will have to charge 12%. Until now, small establishments charged 6% tax

The new GST regime could make staying at a five-star hotel and eating out more expensive.

The government has decided to tax five star hotel services at the highest slab of 28%, much more than the combined service tax (6%) and luxury taxes levied at different rates by individual states at present. This comes as a bad news for hotel owners.

Kamlesh Barot, Director, Revival Group of Hotels said, “This additional burden will have to be borne by the consumer. There will be an increase in bills.”

The new GST regime will also be huge blow to low-budget and non AC restaurants. Under the new GST scheme, low-budget and non AC restaurants will have to charge 12%. Until now, small establishments charged just 6% tax. Apart from this, the GST on hotel rooms in the price range of Rs 2,500-Rs 5,000 will be 18%.

Achin Khanna, MD, Consulting and Valuation, HVS (South Asia), said, “Levying 28% on hotels charging more than Rs 5,000 is atad unfair. The premise seems to be that if you are paying that much, then it’s a luxury. That is certainly not true in this day and age. The tax burden will be borne either by the hotel ownership because they may have to offer all inclusive rates to remain competitive (in leisure markets) or by the end-user, who will be subject to higher tax because he is travelling on work or business (in corporate markets).”

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