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GST has put mixed impact on tourism industry. The GST Rates passed by the GST Council in India has recently updated the tourism and hospitality industry. The GST council has finalised, that it will be applied on their services based on the tariffs and turnover they draw.
Initially, the impact of GST is sure to affect the hospitality industry, which is an important part of the tourism industry. According to industry players, high GST rates on hospitality will create an arduous situation for the sector which is already reeling under demonetisation and liquor ban along the highways. The high incidences of taxes will make India uncompetitive when it comes to tourism as international tourists will skip the country as a destination.
According to GST Rates, 5-star hotels will be charged 28% while AC restaurants and those with liquor licence will be taxed at 18%, non-AC restaurants will charge 12 per cent GST on food bill. Restaurants with Rs 50 lakh or below turnover will go under the 5 per cent composition. Tax rate for AC restaurants and those with liquor licence will be 18 per cent.
Hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12 per cent while those with tariff of Rs 2,500 to Rs 5,000 would be 18 per cent. GST for hotels with tariff above Rs 5,000 will be 28 per cent.
National Restaurant Association of India (NRAI) President Riyaaz Amlani said “ We applaud the government's effort to keep GST at 5 per cent for restaurants below 50 lacs and 12 per cent for restaurants without AC. We are disappointed with the high GST slab of 18 per cent for organised restaurants and 28 per cent for 5 star restaurants. This will not go a long way to promote tourism and tourism related jobs".
However, it may prove to be beneficial for the industry in the long run. The benefits are expected to seek under GST regime, R&D cess to be payable on technical know-how and franchise fees will be reduced as one. This would result in the elimination of compliance procedures and multiple taxes. For consumers, the GST will bring about a hike in prices when it comes to traveling and paying for hotels. But the same is likely to change and benefit in the long run. As the duplication of taxes will be avoided on airlines and hotels, the set-off amount through such taxes would fall back in the laps of customers; hence the customers would be likely to pay less than in the short run.