What? I paid more tax on my hotel stay in India than in UK or Ireland??

Like you know, we just got back from our long trip of the year last week, and someone got to pay the bills after. So, we were going over the receipts, tallying them up with the credit card and so on to make sure everything was okay. Except it kind of burned me a little, or maybe much. And if you’re in India, it should burn you too.

You see, we were over at Dublin, and we figured we’d go all out and make a good weekend out of it. And we did, at the InterContinental Dublin, which is one of the finest luxury hotels in Dublin. We paid an all-in price of EUR 455 for the first night, and EUR 495 for the second night (comped due to the InterContinental Weekend Certificate, eventually!), but I noticed that the taxes were only 9%. Not bad.

InterContinental Dublin

InterContinental Dublin : View of the living room in our suite.

In London, the VAT on everything is 20%. Including hotels. While we did not pay any VAT for our expensive city hotels, given they were a part of the free night redemptions, we paid some when we checked out of our 72 Pound Holiday Inn at the Heathrow Airport on the last night.

The last leg of the trip was over to Goa. We arrived at the Park Hyatt Goa, a hotel I’ve been coming to year after year since 2012. I was glossing over the bill, and the eye-popping 28% GST was staring me in the face. So for 3 nights booked at a discount on one of the Hyatt India sales of 35%, I was almost paying for one night extra this time around. The room rate per night was INR 7,800 and the GST for 3 nights was INR 6,552.

Park Hyatt Goa

Park Hyatt Resort & Spa , Goa: View of the adult pool

I almost cringed when I realised I’d dropped some neat cash to the revenue department, with their very large GST tab on this stay. And this was just the first month of GST coming into play. To add insult to the injury, the same hotel would charge us an 18% of total tax in the off-season for so many years before.

I feel dinged even more, when I compare this to the hotel taxes in Thailand at Grand Hyatt Erawan Bangkok which is only 10%.

Given the long weekend is here, and almost all the holiday destination hotels long weekends will have overpriced room rates hence everyone on a vacation over the next week should be prepared to pay the new GST on top of overpriced room rates.

Bottomline

I could take this to a different tangent talking about how as a honest taxpayer the government shouldn’t put their hand in my pocket and take out money, but I’ll limit this to the concept of luxury.

And before you say this is a #firstworldproblem, it isn’t. It totally beats me that INR 7500 is the bar for a luxury hotel. I would almost count all the 5 star hotels and chain hotels in metros in this league then. The price of a hotel room is set keeping many factors in mind, with the real estate on which it sits being one of the prime ones. Hence, a decent hotel in Connaught Place would always price more than one in Rohini, in Delhi, to quote an example.

I think this would be a serious deterrent to the high-rollers who want to come to India and stay at the fancy-pants places such as the Taj Falaknuma Palace and the Taj Lake Palace, Udaipur. And personally, I’d rather have one luxury high-spender over 3 people arriving in a charter from somewhere and sticking to a set itinerary and going away without buying the hotel extras.

After having paid 9% in a luxury hotel in western countries and 10% in neighbouring Thailand, it really makes me wonder whether the notion of getting top service quality at reasonable pricing at luxury in India will continue to prevail. I think we are punching above our weight with this narrow view on luxury.

What do you feel about the taxation on hotels? I hate it for sure as of this moment on. 

Comments

  1. Just to talk about the Irish system-the government dropped the VAT on the hospitality sector only to 9% during the recession (2011 I think) with a view to increasing tourism and to try and stimulate that area of the economy. The other VAT rates are 13.5% and 23.% It seems to have worked and of course now the government is looking to increase it again as “its done its job”. I think its pretty similar to a few other EU countries to be fair.

    Really hope you enjoyed your time in Dublin.

  2. So, you have no problem paying EUR 450 per night in Dublin and EUR 45 in taxes, but your jaw dropped when you had to pay equivalent of EUR 100 per night in the world class city of Goa and you think 28% tax (which is still less than the 9% tax you paid in dublin) will put so much extra burden on rich folks they would rather go somewhere else? Well, if that was the the case, you won’t have gone to Dublin, and rather stayed in Thailand. Right?

    • @Sachin, let me make it simpler. The definition of Luxury adopted here is to hose them hard, which is what I have a problem with. We’ll agree I hope on the fact that everything becomes more expensive with almost a blanket 3% more on all services, but there is a difference between trying to get a fair share of tax versus trying to gouge. So, a guy spending 2500 INR to stay in Paharganj is on a budget, but the guy staying in Falaknuma Palace should not have to subsidise his tax component just because he can afford to spend more. Heck, he can’t even claim reverse charge.

  3. Comparing our tax rates with those in other countries only causes heartburn and nothing else. I was in Malaysia last month and there is a fixed GST of a princely rate of 6% on everything. Compare that with 18% on fast food items here in India and no wonder everything is so damn expensive. We were at subway and sub was around 105 INR equivalent with taxes whereas same thing would shoot upto 180 INR here in India. The GST rates are probably the highest in the world here.

  4. Well in India the mindset and especially the Govt. of India mindset is still from the old age that if you stay in Luxury hotels you are super rich and that you need to pay the highest tax to compensate for the people who might not be anle to pay so much. While I understand the concept and appreciate the reason behind what I dont understand is why it is across the board ? In London VAT is 20 % – why cant we have a common rate across the board across all hotels – average it out and come at an weighted average GST – say 15-20-25 % – just one rate. The concept of GST was simplification of tax code, but with 4 slabs and cess its just an old wine in a new bottle.

  5. When GST % were released for hotels @ 28%, I started checking the Taxation in Thailand, UK & other countries.

    I thought exactly the same what you have written. But then I thought even more about it.

    There is a very similar example. In Mumbai (Rs.76.10) the petrol prices are the highest and compared to Delhi (Rs.66.96). The difference is Rs.9.14, again I felt the same thing, why such a high price increase in Mumbai only compared to all the cities in India.
    Turns out that Fadnavis charged Rs.9 as Draught Cess for Farmers who were going through a hard time. Below is the link to really understand why the Petrol Prices are high in Mumbai currently.

    http://www.hindustantimes.com/mumbai-news/rs1-000-revenue-from-petrol-hike-will-fuel-agriculture-development-says-maharashtra-government/story-IewOAnVQmmdcTd4akOmEiN.html

    And then, I thought we have so much expenditure to cover and help our 60% poverty people and looking at the GST % all the luxury goods or anything related to luxury is charged 28% cause that’s where they want the money to come from instead of putting burden on Lower – Middle Class who are currently the most important part of thriving Indian Economy.

    While I also felt the pain inside that currently at this point, India is not the best place to travel for luxury but rather plan Europe or Asian Countries which will give you the real value for money.

    Also it’s not just India, but Sri Lanka too.
    Example Taj Bentota for August 11 (1 Night)

    Total Rate: $129
    Taxes: $39.07
    Total: $168.07

    That’s 30.50% (Taxes)

    I also believe 9% of Tax in Thailand makes it so much lucrative because their main Economy thrives on Tourism and that’s where they get the leverage. Also Hotels in Europe are already high priced due to the property prices and it would be a huge burden to put a slab of 28-30% of Tax. Hotels in Paris, London & Amsterdam are very expensive for the central area.

    I honestly wish Indian Luxury Hotels had lower tax cause I’ve never seen such an amazing boom for Luxury hotels openings in India. W Goa, Westin Pushkar, Marriott Jaisalmer, Marriott Walnut Mussoorie, Hilton Shilim, Le Meridien Mahableshwar are just to name a few and what fantastic properties but it definitely burns a hole in your pocket!

    • Ridiculous GST rates will only harm the economy. I know of people who would take staycations in city hotels over weekends once a month. With GST going up to this ludicrous percentage, my friends are now planning a staycation once in 4 months. Businesses get harmed, and overall revenue doesnt necessarily increase.
      This will also impact the luxury travel & conference market. Cost & connectivity matter.

      • You are right. I am also one of those people who would prefer to stay once in 4 months rather than once a month “now”

        But reality is, there is a crowd, there is a medium of luxury travellers who are ready to spend no matter what. The upper rich class are only increasing. The Govt knows this is the best time to get it all out from them.

        I’m not defending Govt here. If the taxes were lower there would definitely be more business and thus more income. But that’s not the situation right now for the Govt. They know even if it’s 20% or 28% The hotels will be making money and the crowd will be coming regardless of any percentage. Reason? the economy is growing. Every class is earning. Some may not be earning but that doesn’t rule out the overall growing economy. Look at all the luxury hotels right now, they are still running the same way they use to do before GST. People are still booking banquets for Marriage in Hyatt or Marriott. People are still going for Sunday Brunches. It’s just the crowd is different, the scene is very well the same for the Luxury Hotels.

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