How GST will Impact the Hotel and Travel Industry in India?


There is no doubt, the hotel and travel industry is one of the fastest growing industries in India. The implementation of the GST on hotel and travel industry eliminates the multiple indirect taxes and improve their business. Hotel and travel industry has just been touted one of the key drivers of the economy. The Indian hospitality and tourism industry, which was pegged at U $ 136.2 billion at the end of 2016, is one of the see major changes post July. Experts observed that implementation of GST will help the industry by reducing cost for customers, harmonizing taxes, and reduce business transaction cost, but will also have its own set of challenges.

The GST council has chosen the GST rates on the hotel and travel industry with many categorization. The hotel have been demanded with various taxes and have chosen that the hotels with the tariff charts below INR 75,000 will be taxed at 5% flat GST tax with no ITC. For the room tax above 75,00 there will be 18% GST tax rate with the facility of ITC.

Taxes will be covered under single bill and combined tax will be way less than anticipated. Wandering people who love to ease around at different corner of the country would get an advantage from the rolled out taxation regime. As per the industry specialist GST rates on hotel and travel industry  has break down the cost and travel expenses in the tourism industry.

The travel industry currently pays a hefty amount to the government but suffers an absence of consideration, however the positive note by the Gautam Khattar, partner, prehousewatercooper said, “on the outside” when you stay at the hotel, you are charged multiple taxes. GST will subsume all these taxes as well the input/procurement taxes. The Indian hospitality and tourism hit different taxes across the channel by Value-add-tax (VAT) output service tax.

Pre and Post GST: How the Situation Has Changed?

Like other industries, hotel and travel multiple taxation has covered in a single duty tax know as GST. Before implementation of GST, people have to pay multiple charges like VAT, luxury tax, and service tax. A hotel where the room charges are more than Rs. 1000, was liable for service tax at 15 %. A reduction of 40% was permitted on the tariff value, thus bringing the effective rate of service tax 9% down. The VAT lies between 12 percent to 14.5 percent and additionally luxury tax would apply above this. However for the restaurants there was 60% reduction which implied that the service tax was charged at the viable rate of 6% on the F&B bills. Bills for bundled services like social gathering (party, marriage function), were tax with the reduction of 30%. The cascading effect of VAT, where a consumer paid tax on tax. Which is very frustrating for the consumers. To address this issue, Indian Government released GST tax on hotel and travel industry  and vanish out multiple taxes.

The Pros of GST:

  • Administrative Ease: GST will nullify several other taxes, promoting a decrease in procedural advances and more opportunities to streamline the tax collection process.
  • Lucidity for Consumers: It was sometimes hard to differentiate between a value added tax and an entertainment tax for a common man. However, under the GST regime customers will see a single charge on their bill and it would give them a clear picture of the tax they are paying.
  • Improved Quality of Service: How frequently have you needed to hold up in the lobby wondering if you would miss your flight back home because your bill was still prepared? With only expense to register, the checking out process at hotels and restaurants will become easier another perk that the hospitality industry brag out.
  • Availability of Input Tax: The travel industry and hospitality industry will think it easier to claim and avail input tax credit and will get full ITC on their input. Before, GST, the tax paid on inputs (raw material, cleaning and supplies etc) could not be adjusted against the output without any complication. In any case, this will end up similar in the GST bill.
  • Ease of Administration: With the implementation of the GST on hotel and travel industry the multiple stages and central taxes imposed on the taxes of hotels have been done away with. This has cut down the burden of the multiple stages of tax system and has resulted in streamlining of the entire process.
  • Less perplexity for clients : Visitors staying  in lodgings and benefiting some uncommon services  were generally confused  by the variety of taxes in their bills. For the greater part of them, it was hard to comprehend the distinction between VAT, administration assessment and extravagance charge. Under the GST framework, they will see just one solidified assessment on their receipt, which will give them a more clear picture of what they are paying in taxes and what is the expense charged on them.


GST is a mixed bag of better and easier rules and regulations, and increased costs and compliances.  Implementation of GST is a good initiative by the government. It reduce the multiple stages and offer single tax above goods and services. In the event if you need to file GST registration, feel free to contact Unilex consultants. We are one of the leading legal advisors who will help you regarding all types of process related to GST process.

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