Just about two years ago, India launched the Goods and Services Tax, which taxed hospitality at a very high rate. Then, GST for hotels where the daily price of INR 7,500 (USD 100) was fixed at 18% and when the daily rate went above INR 7,500, the GST would become 28%. Given that countries in the neighbourhood charged anywhere from 6% to 10% mostly, this was weird to look at branded hotels, which mostly get their business from business travellers and a lot of international tourists. A GST Rate Cut on Hotels was long expected, at least by me.
However, this is now going to be corrected from October 1, 2019. As per the new GST rates notified by the Finance Ministry of India, the following will be the new rates of taxes on hotel stays come October 1, 2019:
- Daily Room Tariff beyond INR 7,500 (USD 100) will be charged a GST of 18% instead of 28%
- Daily Room Tariff between INR 1,000 (USD 14) and INR 7,500 (USD 100) will be charged a GST of 12% instead of 18%
- Daily Room Tariff under INR 1,000 (USD 14) won’t be charged any GST just like now.
The GST Rate Cut on Hotels was announced on the evening of Friday, September 20, 2019, and so far, I have not seen the new rates being in displayed on the websites of the hotels. However, I am confident that when you ask for the price to be checked at the hotel itself, you will get the new tax rate, so make sure to check your invoice if it is a postpaid rate.
How the hotels and portals will honour prepaid bookings after October 1, 2019, onwards where the higher GST was collected is not something I am sure of at the moment. If it is a pre-paid booking with the hotel chain itself, they can adjust the excess amount against your incidentals at the hotel or pay it back to you since the money came directly to the hotel. However, how will it work with an OTA is something I don’t know.
Bottom line is if you are making a hotel stay in India after October 1, 2019, make sure to cross-check the taxes with the new official rates to make sure you don’t pay more. Once a hotel invoice is finalised, and you have checked out, you can’t change the rates later.
What do you make of the new lower prices of hotel stays?