GST on Hotel industry

[CA.VINOD CHAURASIA]

Introduction: This article discusses in detail about the GST taxability of services of provided by hotel  industry.

Types of services provided by Hotel Industry:

1. Room accommodation services.
2. Serving of foods and liquor in restaurant and in room.
3. Rent a cab.
4. Mandap keeper.
5. Banking and financial services like foreign currency exchange.
6. Supply of packed food items as mini bar.
7. Renting out the premises for events, conferences etc.
8. Catering.
9. Laundry services.
10. Business support services.
11. Telecommunication services like telephone, fax, wifi.
12. Beauty parlour
13. Gymnasium services.
14. Club Facility

Applicable GST Tax Rates

Renting of hotels, inns, guest houses, clubs, campsites or other commercial places
Sl. No.	Room Tariff Per Day	Rate of Tax
1	Less  INR 1,000	0%
2	Between INR 1000 but less than 2500	12% With Full ITC
3	Between INR 2500 but less than 7500	18% With Full ITC
4	INR 7500 or above	28% With Full ITC

 

Supply of Food/drinks in restaurant
Sl. No.	Criteria	Rate of Tax
1	Supply of Food/drinks in restaurant not having facility of air-conditioning or central heating at any time during the year and not having licence to serve liquor.	12% With Full ITC
2	Supply of Food/drinks in restaurant having facility of air-conditioning or central heating at any time during the year	18% With Full ITC
3	Supply of Food/drinks in restaurant having licence to serve liquor	18% With Full ITC
4	Supply of Food/drinks in outdoor catering	18% With Full ITC
5	Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises	18% With Full ITC
6	Supply of Food/drinks in air-conditioned restaurant in 5-star or above rated Hotel	18% With Full ITC
7	Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go rounds, go-carting, casinos, race-course, ballet, any sporting event such as IPL and the like;	28% With Full ITC
Point to be Noted: Serving of Alcoholic drinks will be outside the preview of GST and local sales tax or VAT shall be applied on the same. It is advisable for the hotel to issue the separate bills for alcoholic drinks and foods.

 

RENT A CAB
1	Rent a cab (If fuel cost is borne by the service provider)	5% with No ITC.
		ITC shall be available if cab is booked from other cab operator.
2	Rent a cab (If fuel cost is borne by the service recipient)	18% with ITC Credit.

 

MANDAP KEEPER
1	Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises	18% With Full ITC

 

FORIEGN CURRENCY EXCHANGE SERVICES
1	In case of currency exchange to its guest	18% with ITC Credit, but valuation shall be done as per valuation rules
Valuation of currency Rules
1	Between INR 0 to 1 Lakh	1% or ₹ 250/-, Whichever is higher
2	More than INR 1 Lakh to 10 Lakhs	₹ 1,000 + 0.50%
3	More than INR 10 Lakhs	₹ 5,000 + 0.10%  or  ₹ 60,000/-, Whichever is lower

 

 

SUPPLY OF PACKED FOOD IN MINI BAR
1	Supply of packed food in mini bar	Rate shall be as per product rate.

 

 

Other Services
1	Renting out the premises for events, conferences	18% with full ITC Credit.
2	Laundry services	18% with full ITC Credit.
3	Business support services	18% with full ITC Credit.
4	Telecommunication services like telephone, fax, Wi-Fi.	18% with full ITC Credit.
5	Beauty parlour	18% with full ITC Credit.
6	Gymnasium services	18% with full ITC Credit.
7	Club Facility.	18% with full ITC Credit.

How to determine place of supply in case of hotel industry:

Nature of Services	Place of Supply
Accommodation by a hotel, inn, guest house, home stay club or campsite	Location of immovable property
Accommodation by a hotel for organising marriage or  reception or matters related thereto official, social, cultural, religious, or business function	Location of immovable property
Any services ancillary to the above	Location of immovable property
Restaurants or  catering services, personal groomig, fitness, beauty treatment, health services	Location where services are actually performed

 Time of Supply:

In case of Food, time of supply would be immediately after the delivery happens

In case of service, time limit of 30 days available for raising the invoice.

For advance booking, the time of supply is due immediately on receipt of money.

Input Tax Credit

 Input tax credit is available:

• in case of all purchases of materials for day to day operations of the Hotel.
• in case of purchase of capital goods like furniture & fixtures etc,  cutlery, bed linen, utensils etc.
• Plant & Machinery

Input tax credit is not available:

• For purchase of Liquor, input tax credit not available.
• New investment in building (immovable property) self constructions.

The author is a practising CA based in Delhi and is registered Insolvency Professional. He can be reached at [email protected] , Mob. +91 9953587496.

Discussions to this article

[Himansu Sekhar]

I have taken a printout for reference. Excellent compilation. Thanks.

[Masoom Sahoo]

To help you know better about impact of GST on Hotels. I'm listing out the pros and cons of it.

The Pros of GST

1. Administrative Ease

GST will abolish several other taxes, leading to a reduction in procedural steps and more chances to streamline the taxation process.

2. Clarity for Consumers

It was sometimes difficult to differentiate between a Value Added Tax and an entertainment tax for the common man. However, under the GST regime customers will see only a single charge on their bill and it would give them a clear picture of the tax they are paying.

3. Improved Quality of Service

How many times have you had to wait in the hotel lobby wondering if you would miss your flight back home because your bill was still being prepared? With just one tax to compute, the checking-out process at hotels and restaurants will now become easier – another perk that the hospitality industry can brag about.

4. Availability of Input Tax

The tourism and hospitality industry will find it easier to claim and avail input tax credit (ITC) and will get full ITC on their inputs. Before GST, the tax paid on inputs (raw edibles for food, cleaning supplies etc.) could not be adjusted against the output without any complications. However, this will become easier in the GST regime.

The Cons of GST

1. Increased Technological Burden

When the service tax was first introduced, there were a lot of mix ups. GST, thankfully, has very clear guidelines on how each industry needs to manage their accounts and file returns but it will require businesses to become technologically adept, increasing the technological burden and cost for compliance.

2.Increased Costs

In Maharashtra, for instance, hotel rooms were earlier taxed at 19% and food and beverage at 18.5%. Even with GST charged at 18%, there is only a minimal cost reduction in both cases. Businesses will also look to recover the additional cost of technology and new systems from their customers, which might – in some instances – lead to higher tariffs.

3. Lack of Parity with Asian Counterparts

As India becomes an even bigger player in the global hospitality and tourism industry, we need services to be at par with global rates. Our Asian neighbors such as Japan and Singapore have very low tax rates for their hospitality sector (8% and 7% respectively) which is an important reason for them ranking high on tourist wishlists. India is a global tourism hotspot, but it still loses out on the backpacker crowd due to these high rates.

To know more about GST on hospitality, read this article.

[Masoom Sahoo]

Link your Aadhaar with PAN.