This is good news for travelers and anyone needing a hotel stay, as accommodation is expected to get cheaper after a crucial rule change by the Goods and Services Council last week. The council decided on Saturday that GST on the accommodation service would be charged on the “transaction value,” rather than the “declared rate,” meaning guests will now save additional taxes if hotels offer accommodations. reductions.
Different slabs of GST are levied on different accommodation prices. Under the GST regime, for rates up to Rs 999, there is no tax. For tariffs of Rs 1,000 to Rs 2,499, the GST rate is 12%; from Rs 2,500 to Rs 7,499, the GST is 18%; from Rs 7,500 and more, the GST rate is 28%.
Under the previous rule, GST was charged on the declared rate. For example, if the declared rate for a hotel room is Rs 10,000, it would fall under the highest tax bracket of 28%. If a guest were to book this room at a reduced rate of Rs 7,000, the person would have to pay a 28% tax on the amount of the reservation.
Now, under the new rule, the customer will pay a tax on the value of the transaction, which will be 18% on Rs 7,000 as it falls under the 18% tax bracket, explained Garish Oberoi, chairman of the Federation of Hotel and Restaurant Associations of India (FHRAI).
|Rate||10,000 rupees||Rate||10,000 rupees|
|Delivery||3,000 rupees||Delivery||3,000 rupees|
|Reservation||7,000 rupees||Reservation||7,000 rupees|
|GST @ 28% on Rs 7,000||Rs 1,960||GST @ 18% on Rs 7,000||Rs 1,260|
|Total||8 960 rupees||Total||8,260 rupees|
The previous collection of GST on the declared rate caused confusion among customers. The declared rate or displayed rates are defined by the dynamics of the high season, which made taxes payable higher even though hotels provided discounted accommodation services throughout the year. Analysts say the new GST rules will make luxury living more accessible for the middle class and increase the competitiveness of hotel companies.
“An approximate benefit of between 10% and 30%, or even more, could benefit the consumer (business / individual) on the GST paid for the use of these hosting services (subject to the definition of rate brackets). taxation for the value of the transaction), ”Jigar Doshi, Partner of Indirect Taxation, SKP Business told FE Online.
However, there might be a caveat. If the price is reduced, customers will benefit, but in some cases, they might end up paying more. If a client booked a room of Rs 7,000 and took advantage of an extra bed of Rs 1,000, this makes the total rate of Rs 8,000. Since under the previous rule, GST was levied on the declared rate. of Rs 7,000, which would be 18%. However, from now on, GST will apply to the total transaction value of Rs 8,000, or 28%, Ritul Patwa, CA, told FE Online.
The GST Council said the new rules will take effect after the government issues an official notification. Besides changing the GST rules for hosting services, the council also reduced taxes on more than 100 items, including white goods.