GST on hospitality industry

1. GST on Hospitality Industry

2. GST is a non-discriminatory tax, and its effect will be seen
across verticals.
The Indian hospitality and tourism industry, which was pegged
at US$ 136.2 billion at the end of 2017, is one of the sectors which
will see major changes post-July. Experts observe that the
implementation of GST will help the sector by reducing costs for
customers, harmonizing taxes, and reducing business transaction
costs, but will also have its own set of challenges.
Impact of GST on Hotels

3. Pre GST
Similar to other industries in India, there were multiple taxes
applicable to hotel industry. These were chiefly in the form of value
added tax (VAT), luxury tax and service tax. The VAT that ranged
between 12% and 14.5%, as well as the luxury tax, was applied over
and above this.

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Post GST
Under the Goods and Service Tax, the hospitality sector stands to reap
the benefits of standardized and uniform tax rates, and easy and better
utilization of input tax credit. As the final cost to end user decreases,
expect the industry can expect to attract more overseas tourists than
before. This would ideally result in improved revenues for the
government, and there are many pros to this new tax regime which
could help the industry’s growth in the long run. For instance,
complementary food (like breakfast) was taxed separately under VAT,
but now it will be taxed under GST as a bundled service.

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Pros of GST
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 was sometimes difficult to differentiate between a Value Added
Tax and an entertainment tax for the common man. 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.

6. Pros continued
Availability of Input Tax:
The tourism and hospitality industry will find it easier to claim
and avail input tax credit (ITC) and will get full ITC on their
inputs. Before GST, the tax paid on inputs (raw edibles for
food, cleaning supplies etc.) could not be adjusted against the
output without any complications. However, this will become
easier in the GST regime.
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 RATE OF GST – Renting of hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or
lodging purposes:-
 Declared Room Tariff upto Rs. 999/- : GST @ NIL
 Declared Room Tariff from Rs. 1000/- upto Rs. 2499/- : GST @ 12%
 Declared Room Tariff from Rs. 2500/- upto Rs. 7499/- : GST @ 18%
 Declared Room Tariff from Rs. 7500/- and above : GST @ 28%

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10. Impact of GST on Airfares:
The cost of travel for economy class passengers is likely to be
remaining same. Economy class air travel will became cheaper
with the tax rate 5% against the existing 6% under the GST
regime. But the travelling Business class ticket will became
dearer as the tax will go up from 9%to12%.which will affect
the airline industry. Due to competitive scenario, the airlines
are not expected to implement the tax burden to passenger
as it might affect the airlines occupancy rate.
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12. Impact of GST on restaurants
According to the National Restaurant Association of India’s India
Food Service Report, the current size of the Indian food service
industry is Rs4,08,040 crore in 2018.Many dishes in India could be
cheaper after GST.
Gains to the restaurant sector:
› Overall cost of procurement of raw materials will go down
› Since most items used in the restaurant industry like food
grains, milk, eggs, curd, common salt, unbranded besan,
sugar, tea, edible oils etc. are either exempt from GST or are
in the 5% GST bracket, the restaurant industry has a lot of
positive takeaways.
› Though the entire restaurant industry will benefit from GST,
cloud kitchens and Food delivery businesses will be most
benefited. 12

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Establishment Type and Services GST Rate Applicable
At establishments with turnover of <INR 75 lakh 5% (Composition Scheme)
Non-AC restaurants not serving alcohol 12%
Non-AC restaurants serving alcohol 18%
Restaurants with AC or Central heating (whether
serving or not serving alcohol)
18%
Partly AC and partly non-AC restaurants (includes
those serving and those not serving alcohol)
18%
AC Restaurants inside 5-Star Hotels 18%

14. Impact of GST on Tourism
› Tourism is one of the sectors in the economy that is
deliberately over the new regime. Hospitality is one of the
most competitive and steadily growing industries in the
country. The tourism industry contributes nearly US$136
billion to India’s GDP and is expected to further grow to
US$280.5 billion by 2026.
› Hospitality and tourism are also among the highest
employment generating sector and among the top ten sectors
in the country with the highest volume of foreign direct
investment. In addition to being one of the top sources of
foreign exchange, tourism is also among the higher tax
generating sectors in the country
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15. Travel Industry is one of the booming sectors of the Indian
economy .
The new GST tax slabs of 5%, 12%, 18% and 28% are out and
the Impact of GST on Travel industry is disappointing. The
industry believes that the higher tax slabs will impact and
hinder growth, putting pressure on the bottom line and
squeezing the margins of industry players.
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16. GST on Healthcare Sector
• GST has now slotted life-saving drugs for Diabetes, Malaria, TB, HIV-AIDS
compulsorily under the 5% slab, while categorizing formulations into the 12
percent slab (up from nine percent).
• Medical furniture such as beds, dentist’s chair and operating table etc.
will be charged at 18% slab of GST
• Diagnostics has been put in 18% and 12% tax slabs; it was 16% prior to
GST
• Some medicines have become more expensive under the GST regime, the
cost of MRI (Magnetic resonance imaging) and X-rays may increase
marginally
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17. GST on Healthcare Sector
• Medical tourism generates extra revenue for Healthcare industry; it
has grown from $334 million in 2004 to $2 billion this year. With the
implementation of GST, medical tourism is also projected to grow
manifold due to exemption.
• Currently, 5 percent of the country’s GDP is expended on the
Healthcare sector. The healthcare sector is expected to touch $150
billion by end of 2017, from $80 billion in the year 2012 due to the
introduction of GST.
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18. THANK YOU
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19. Questions
Q.1) GST rate for declared room tariff from Rs. 7500/- and
above?
A- 17%
B- 20%
C- 28%
D- 27%
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20. GST on declared room tariff from Rs. 7500/- and above is 28%
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21. Questions
Q.2) GST rate on Non-AC restaurants serving
alcohol?
A-17%
B- 18%
C- 19%
D-20%
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22. GST rate on Non-AC restaurants serving alcohol is 18%
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