Home Hotel guest Plan a trip? Be prepared to spend more as all hotel rooms will be taxed under GST

Plan a trip? Be prepared to spend more as all hotel rooms will be taxed under GST


Plan a trip? Be prepared to spend more as all hotel rooms will be taxed under GST

Budget travelers will end up paying more now as hotel rooms below Rs 1,000 will now be taxed at 12% Goods and Services Tax (GST), a decision which was made by the Council of the GST at its two-day meeting last month. The decision will take effect from July 18.

Hotel rooms below Rs 1,000 were previously exempt from GST and those above the threshold were charged 12% tax. Rooms above Rs 7,500 fell under the 18% GST tax bracket.

According to a press release issued by the GST Board on June 29, 2022, “Hotel rooms priced up to Rs 1,000/day will be taxed at 12%.” (However, the government has yet to issue a notification in this regard.)

Poonam Harjani, Head, Indirect Tax Research and Advisory, Taxmann.com was quoted as saying in an ET report, “So far, the services of a hotel, hostel, guesthouse , a club or a campsite for residential or accommodation purposes, having an offer value of an accommodation unit less than or equal to Rs 1,000 per day or the equivalent has been exempted from the GST Council has recommended to remove the said exemption and apply a GST rate of 12% on it With this rate change, all hotels having declared a rate of Rs 7,500 or less will be subject to GST at the rate of 12% That said, levying GST on budget hotels will make holidays more expensive for the common man.

After July 18, 2022, the GST that will be charged on the hotel room will be as follows: rooms costing up to Rs 7,500 will incur 12% GST and those above Rs 7,500 will be subject to an 18% tax.

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Abhishek Jain, Partner, Indirect Taxes, KPMG India said: “The government is seeking to remove the exemption for hotel accommodation which is priced up to Rs 1000 per day, and as such said accommodation will be taxable at 12%. This change was introduced by the government to broaden the tax base but will increase the cost to end customers in this segment.”

To explain how it will impact you. Suppose you book a hotel room for two nights at the price of Rs 900 per night. Prior to the announcement of the GST council, you had to pay a total amount of Rs 1,800 and no GST was levied on it. However, from July 18, 2022, GST at the rate of 12% will be levied. You will have to pay Rs 1,800 plus Rs 216 in GST. The total amount to be paid by you will be Rs 2,016 as hotel room charges.

However, small hoteliers may still qualify for GST payment relief. “As a relief, very small hotels will still not be covered by GST if their annual income is below the taxable limit of Rs 20 lakh,” Harjani said.