Hotel rooms

GST: Holidays will become more expensive from July 18, as all hotel rooms will be taxed under GST

Those looking to vacation on a budget should be prepared to shell out more for their hotel rooms starting July 18, 2022. Indeed, the Goods and Services Tax (GST) Board has announced that From July 18, even hotels that charge less than Rs 1,000 a day will come under the GST net.

According to a press release issued by the GST Board on June 29, 2022, “hotel rooms priced below Rs 1,000/day will be taxed at 12%.” (However, the government has yet to issue a notification in this regard.) Until now, GST exemption was available for hotel rooms up to Rs 1,000 per day.

Poonam Harjani, Head of Indirect Tax Research and Consulting, Taxmann.com, says: “So far, the services of a hotel, hostel, guest house, club or a campsite for residential or accommodation purposes, having a supply value of an accommodation unit of less than or equal to Rs. 1,000 per day or equivalent has been exempted from GST. GST has recommended removing the said exemption and applying a GST rate of 12% on it With this change in the rate, all hotels having declared a rate of Rs. rate of 12% That said, levying the GST on budget hotels will make holidays more expensive for the common man.

After July 18, 2022, the GST that will be charged on the hotel room will be as follows:

Hotel room cost GST rate
Up to Rs 7,500 12%
Rs 7,501 and more 18%

Source: Taxmann.com

Abhishek Jain, Partner, Indirect Taxes, KPMG India, says: “The government is seeking to remove the exemption for hotel accommodation which is priced up to Rs 1,000 per day, and as such, said accommodation will be taxable to 12%. This change was introduced by the government to broaden the tax base but will increase the cost to end customers in this segment.”

To explain how it will impact you. Let’s say you book a hotel room for two nights at the price of Rs 900 per night. Prior to the announcement of the GST council, you had to pay a total amount of Rs 1,800 and no GST was levied on it. However, from July 18, 2022, GST at the rate of 12% will be levied. You will have to pay Rs 1800 plus Rs 216 as GST. The total amount to be paid by you will be Rs 2016 as hotel room charges.

However, small hoteliers may still qualify for GST payment relief. “As a relief, very small hotels will still not be covered by GST if their annual income is below the taxable limit of Rs 20 lakh,” says Harjani.