GST on Hotels: The Indian tourism industry plays a vital role in strengthening Foreign relations in India, and most of India’s revenue comes from the tourism industry itself. At present, the Indian tourism industry is expected to grow at even a higher pace. Indian tourism industry consists of two major components, i.e. hotels and restaurants. Mainly hotels act as the backbone of the tourism industry, and without hotels, tourism in India would not have survived at all.
Before the advent of GST, Hotels were supposed to comply with various other taxes such as Value Added Tax (VAT), Service Tax, etc. The compliance with all these taxes made it difficult for the hotels to do business. But later in 2017, with the implementation of GST, it became more accessible for the Hotels as all the taxes were subsumed under one single tax. Compliance with the GST was much easier than compliance with all the other taxes.
Here in this article, we will discuss the various aspects of GST on Hotels.
- GST on Hotels
- Tariff Per Night GST Rates
- Place of Supply for GST on Hotels
- Registration for GST
- GST on Bookings From Online Portal
The Goods and Service Tax Act states that any service provided by a hotel is taxable under GST. The GST act provides for the different tax rates for various tariffs on rooms in a hotel.
The implementation of GST has benefitted the hotel industry in many ways. GST provides the benefits of standardised and uniform tax rates for hotels that are easy to comply with. It also allows better utilisation of input tax credit and eventually decreases the rates for the end-user, which in turn attracts more and more customers.
As discussed earlier, the GST rates are applicable on the price charged by the hotels from the customers on a per night basis. Most of the time, people think that GST rates depend on the star ratings of the hotels, which are not valid.
Till 2018 the GST was applicable on the declared tariff of the hotels, but later in July 2018, the rules were changed, and the GST was charged on the total value of supply. Given below is a table that depicts the GST rates charged by hotels on tariff per night:
- When the price less than ₹1,000 – No GST applicable
- When the price charged is ₹1,000 – ₹7,499 – 12% GST applicable
- When the price charged is ₹7,500 or more – 18% GST applicable
Under GST, the place of supply of the goods or services plays a vital role. Similarly, the place of supply for the services provided by a hotel plays a crucial role in the calculation of GST.
For GST on Hotel services, the place of supply is always the state or the union territory in which the hotel or lodge is situated. The place of supply won’t be changed even if the person availing of the hotel service belongs to another state and has a registered GSTIN in another state. The hotels for such cases charge both SGST and CGST.
The registered person can only take an input tax credit if the hotel is registered in the same state as the person.
For example: When a person registered in Jaipur goes to a hotel in Jodhpur and pays SGST and CGST on the bill, they can take input credit of the same. But when the same person travels to any other state, say Delhi and pays SGST and CGST on the hotel bills. In such cases, they cannot take an input tax credit for the same as the person is registered in Jaipur and the hotel is registered in Delhi.
As per the GST laws, a person or a business is supposed to get registered under the GST act to charge GST from its customers. Similarly, a hotelier is required to get a registration to charge GST.
A hotel is bound to get registered under GST if the yearly turnover of the Hotel is equal to ₹10 lacs or ₹20 lacs or more. But, if the hotel’s turnover is less than the specified limit, and it may or may not get registered under GST.
When a hotel is registered on any e-commerce portal such as Make my trip or OYO or Go Ibibo, and the hotel’s turnover is less than that of the specified limit, it may not get registered under GST.
At present, it has become very common for hotels to get bookings from online e-commerce portals. In such cases, if the hotelier has a turnover less than the specified limit and is not registered under GST, then it is the e-commerce operator who is liable to charge GST on the transactions made.
If the hotelier is registered under GST, then it charges GST from the clients by itself. In such a case, the e-commerce operator is supposed to deduct TCS at 1% on the transactions made.