Travel And Tourism Industry Urges Govt For Uniform 12 Per Cent GST Rate For Hotels

The tourism industry is rebounding and experiencing significant growth following the COVID-19 pandemic. India's domestic and outbound travel has surged, showcasing the nation's burgeoning economic prowess and a heightened passion for travel and discovery. The travel and tourism industry is calling on the government to implement a consistent 12 per cent GST rate on hotels in the forthcoming 2024-2025 Budget in order to stimulate both domestic and inbound tourism.

Confusion Due To Differing Rates

The current variations in GST rates based on hotel room tariffs create significant price discrepancies, causing confusion and imposing additional compliance burdens. For instance, while rooms priced at Rs 10,000 are subjected to an 18 per cent GST rate, off-peak rates of Rs 7,000 incur a 12 per cent tax. This disparity highlights the urgent need for a more streamlined and consistent approach to GST in the hotel industry.

“We urge the finance minister to consider a uniform GST rate of 12 per cent on hotels in Union Budget FY25. This will help simplify the compliance processes,” online travel services provider MakeMyTrip co-founder and Group CEO Rajesh Magow said.

Magow stated that the government ought to eliminate discrepancies between e-commerce operators and e-commerce suppliers in the local market. “For example, currently, a customer pays a 5 per cent GST (goods and services tax) charge when booking a non-AC bus through an e-commerce platform. This charge is zero for a direct booking from a bus operator, irrespective of whether it is done in online or offline mode,” he added.

Tax Incentives On Sustainable Stays

Magow also emphasised that providing tax incentives to hotels and homestays for embracing sustainable practices is in line with India’s dedication to the United Nations Sustainable Development Goals, specifically targeting SDG 11 (Sustainable Cities and Communities) and SDG 13 (Climate Action). “By offering tax incentives that promote eco-friendly measures in the tourism sector, such as energy-efficient lighting, water-saving devices, and waste-reduction practices, the finance minister will be encouraging the industry to contribute to these global goals,” he explained.

A Priority Sector

Pradeep Shetty, President of the Hotel And Restaurant Association (Western India), reiterated the crucial need for tourism and hospitality to be recognised as a priority sector, considering its significant contribution of around 10 per cent to India's GDP. “Granting infrastructure status to hotels and convention centres of project cost of Rs 10 crore and above is essential for attracting investments and accelerating growth in the hospitality sector,” he said. He stressed that the current GST rates for the hospitality sector are excessively high on a global scale, resulting in increased tourism costs. “We urge the abolition of the 18 per cent GST category for hotels with room rates above INR 7,500 per night, merging it with the 12 per cent GST category to boost both domestic and inbound tourism,” he noted.

Shetty emphasised the importance of having a national e-single window clearance system for hotels and restaurants through the Hospitality Development Promotion Board to enhance competitiveness and reduce costs, as ease of doing business is crucial.

Executive Chairman Madhavan Menon of Thomas Cook (India) Limited (Thomas Cook, SOTC, Sterling Holidays, and TCI) has strongly advocated for the exemption of Section 53 of GST for travel agents. “This will not cause any revenue loss for the government, as airlines are already discharging tax on their sale. We would also recommend lowering TCS (Tax Collected at Source) to 1 per cent. If not, a standardisation at 5 per cent on foreign travel packages (against the current 5 per cent and 20 per cent slabs),” he said.

(With inputs from PTI)