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How GST implementation will have a impact on hospitality sector?

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How GST implementation will have a impact on hospitality sector?

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Hospitality Industry in India, a big contributor to the country’s economic growth is on high growth. Definitely, gst implementation from July 1,2017 will have huge impact on the hospitality sector.
Presented By http://www.4dhotelbookingsoftware.com/

Hospitality Industry in India, a big contributor to the country’s economic growth is on high growth. Definitely, gst implementation from July 1,2017 will have huge impact on the hospitality sector.
Presented By http://www.4dhotelbookingsoftware.com/

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How GST implementation will have a impact on hospitality sector?

  1. 1. How GST implementation will have a impact on hospitality sector
  2. 2.  Hospitality Industry in India, a big contributor to the country’s economic growth is on high growth trajectory and is expected to reach Rs 2796.9 thousand crores by 2022.  The industry also contributes significantly to employment, FDI and Foreign exchange.  Recently the industry has already been severely impacted by the Supreme Court liquor ban and the much awaited Goods and Services Tax (GST) rates has come as another shocker.
  3. 3. Current Situation  The hospitality industry, like every other sector in the Indian economy, pays multiple taxes (VAT, luxury tax, and service tax) in the existing indirect tax regime.  A hotel where the room tariff exceeds Rs 1,000 is liable for service tax at 15 %.  An abatement of 40% is allowed on the tariff value bringing the effective rate of service tax down to 9%.
  4. 4.  The Value Added Tax (ranging between 12 % to 14.5 %) and luxury tax will still apply.  However, for restaurants there is 60% abatement which means that the service tax is charged at an effective rate of 6% on the F&B bills, apart from VAT (12 % to 14.5%).  Bills for bundled services like social functions (seminars, marriage etc.), are taxed with an abatement of 30%.
  5. 5.  The cascading effect of the existing indirect tax regime where the end consumer pays a tax on tax, increases the end cost.  Hoteliers and hospitality businesses do not get any input tax credit on the taxes they pay currently, as central taxes cannot be set off against state taxes (VAT) and vice-versa.
  6. 6. Present GST System  The tourism and hospitality industry in India recently got updated with a new set of Goods and Services Tax (GST) rates that will be rolled out from July 1.  It will be applied on their services based on the tariffs and turnover they draw, the GST council has finalised.
  7. 7.  While budget hotels i.e. those with INR 1,000 a day for rooms, will attract low or even nil tax rates, those charging INR 5,000 and more room tariff per day will have to pay 28 pc GST.  Currently lower budget hotels make up about 80 pc of the hospitality market in India.  The new rates will come into effect from July 1.
  8. 8. GST Rates  The GST on hotels and lodges which charge between Rs 1,000 and Rs 2,500 will be 12 %.  While, the GST on hotel rooms in the price range of Rs 2,500-Rs 5,000 will be 18 %.  For lodges and hotels cheaper than Rs 1,000, the GST is set at 5 %.
  9. 9.  Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 per cent.  Non-ac restaurants will have a 12% tax rate.  AC restaurants will have to shell out 18% tax.
  10. 10.  As the final cost to end user decreases, we can expect the industry to attract more overseas tourists as compared to our neighbours.  Today when most of the Indian restaurants and hotels are contributing to country’s economy as well as to the employment sector.  GST will definitely have an impact the sector be it a small or large scale business.
  11. 11.  Qualifying the sector for the lower tax slab would have helped to the employment generator sector, diners and tourists.
  12. 12. Positive Impact Administrative Ease:  GST will abolish several other taxes, leading to a reduction in procedural steps and more chances to streamline the taxation process. Clarity for Consumers:  It is still very difficult to differentiate between a Value Added Tax and an entertainment tax for the common man.
  13. 13.  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. Improved Quality of Service:  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.
  14. 14. Negative Impact Increased Technological Burden:  GST 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.
  15. 15. Lack of Parity with Asian Counterparts:  Our Asian neighbours 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.
  16. 16. Industry Views  “Levying 28 pc on luxury and five-star hotels is myopic,” Achin Khanna, managing director, consulting and valuation practice, at consulting firm HVS told the Indian press.  “Hotels charging more than INR 5,000 do not automatically mean they are a luxury hotel or catering to want based travel,” Khanna commented while also saying that the move will also impact end customers.
  17. 17.  “The government has not realised the importance of providing impetus to hospitality and tourism sectors, which are one of the highest employment generating sectors,” Riyaaz Amlani, president of National Restaurant Association of India said to an Indian daily.  Amlani of National Restaurant Association of India said heavy taxation and regulation would only lead to “leakages” in government revenues.
  18. 18. Source  http://www.thehindu.com/news/cities/Visakhapatnam/gst-rates-will-impact- hospitality-sector/article18664042.ece  http://mediaindia.eu/indian-travel-trade/gst-rates-on-hospitality-and-tourism- industry/  http://www.financialexpress.com/money/how-gst-will-impact-hospitality- industry/609363/  http://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/gst- rate-on-top-hotels-restaurants-upset-hospitality-tourism- industries/articleshow/58757234.cms  http://www.hotelierindia.com/impact-of-gst-on-india-hospitality-industry/  http://www.businesstoday.in/current/corporate/gst-tax-rates-will-affect-your- restaurant-bill/story/252551.html  http://hhd.psu.edu/media/overview/callout-images/Fairmont_Lobby_WEB.jpg  http://www.thehindubusinessline.com/multimedia/dynamic/03167/BL24_P6_HOT EL_3167552g.jpg  http://images.financialexpress.com/2017/05/hospitality.jpg
  19. 19. Thank You http://www.4dhotelbookingsoftware.com/

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