Budget holidays, camping will become more expensive as rooms below Rs 1,000 will attract 12% GST from July 18

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Your budget holiday is set to get more expensive from July 18 as hotel rooms below Rs 1,000 will now be taxed at 12% Goods and Services Tax (GST), a move by the GST advice during its two-day meeting.
For example, if the room cost Rs. 800 earlier, now with an additional 12% GST, the cost of the room would increase to Rs. 896.
Rooms below Rs 1,000 were previously exempt and those above the threshold were charged 12% GST. Rooms above Rs 7,500 fell under the 18% GST tax bracket.
Note: This 12% GST rate is not only applicable on hotels, but also on guest houses, camp venues or clubs or any other accommodation facility. “Thus, commercial accommodation of all types would be covered in this scenario. The impact of this increase would be felt mainly by the middle and lower class, as holidays would become expensive for them. Elderly people and pilgrims would also feel the pinch as GST would also become payable on stay in dharamshalas at the pilgrimage site,” said Ankit Jain, Partner, Ved Jain & Associates.
While hostels owned by schools and colleges would continue to be exempt from the GST, it is unclear whether private hostels will always remain exempt from the tax. Similarly, paying customers may also be covered by this tax.
“The recommendation of the GST Board to remove a GST exemption on hotel rooms and other accommodation which cost up to INR 1000/night, will however widen the tax base but will also make budget hotels expensive for an ordinary man in 12%,” said Sameer Jain, managing partner, PSL Advocates & Solicitors.
The levying of 12% GST on rooms below Rs 1,000 legitimizes economy class hotels and should lead to better guest facilities.
“There were several unlicensed hotels in the category of rates below INR 1,000/day for hotel accommodation. Being a big industry, it was costing the government in terms of taxes, and it was necessary to include them in the scope of the GST. However, the government could have opted for the imposition of 5% GST instead of the new rate of 12%, as the new rate will affect budget travellers,” Nikhil said. Varma, Managing Partner, Miglani Varma & Co – Lawyers, Lawyers and Consultants.
But small hoteliers can still get relief from paying GST if their annual income is below the taxable limit of Rs 20 lakh.
“This is a pragmatic move to broaden the tax base and remove valuation anomalies. This will also deal with cases of tax evasion in which the room rate has been artificially managed to keep it below Rs 1,000 so that there is no GST burden. There shall be no significant burden on customers as this sector has a high price elasticity of demand and there will now be full credit eligibility for the service provider as all services have become taxable. to exempt and taxable supplies, this will help reduce compliance complexities for small hotel suppliers and improve tax collection without any substantial increase in cost to the recipient,” said Abhishek A Rastogi, Partner at Khaitan & Co.


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