India’s decision that hotel rooms charging above Rs5,000 (US$77.11) would be subject to the highest Goods and Services Tax (GST) bracket of 28 per cent has caught flak from the trade, who believes this will compromise the destination’s price competitiveness.
The tax council has pegged hotels with rooms priced Rs1,000-2,500 at 12 per cent, and 18 per cent for those between Rs2,500 and Rs5,000.
Ankur Bhatia, executive director at Bird Group, said: “The industry has already been severely impacted by the liquor ban and this GST rate comes as another shocker. The new tax structure will position India poorly as a destination in comparison to our international competitors with much lower taxation.”
“By increasing the rate to 28 per cent for mid-to-high class hotels, inbound tourism will take a hit by at least 10 per cent,” said Rishi Puri, vice president, Lords Hotels & Resorts. “More ironic is the zero tax on hotels priced below Rs1,000, which sends out the signal that India prefers backpackers and that those with more money should look for other destinations.”
Dilip Datwani, president, Hotel and Restaurant Association of Western India, added: “While neighbouring countries like Myanmar, Thailand, Singapore and Indonesia levy taxes ranging from five to 10 per cent, we cannot afford to have such kind of high taxation structure. Tourists will simply skip India.”
Not all hoteliers are unhappy, as budget chain OYO founder and CEO Ritesh Agarwal stated that lower tax brackets will spur higher standards for the lower-tier accommodation.
