Those hoping for a cheap vacation might expect to pay extra for their hotel accommodations starting July 18, 2022. Because the Goods and Services Tax (GST) Council declared on July 18 that hotels charging less than Rs 1,000 per day would be subject to GST.
According to a news release made on June 29, 2022, by the GST council, “hotel accommodation priced up to Rs 1000/day would be taxed at 12%.” (However, the government has yet to release such a notification.) Until now, hotel rooms up to Rs 1,000 per day were free from GST.
According to Poonam Harjani, Taxmann.com’s Leader of Indirect Tax Research and Advisory, “So far, services provided by a hotel, inn, guest house, club, or camping for residential or lodging purposes with a supply value of Rs. 1000 per day or comparable have been excluded from GST. The GST Council has proposed that the exemption be repealed and a 12 percent GST rate be applied. With this rate change, all hotels with reported tariffs of Rs. 7500 or less would be subject to GST at the rate of 12%. However, the imposition of GST on low-cost hotels would make vacationing more expensive for the average person.”
According to Abhishek Jain, Partner, Indirect Tax, KPMG India, “The government intends to repeal the exemption for hotel accommodations valued up to Rs 1000 per day, making such accommodations taxed at 12%. The government implemented this reform to broaden the tax base, but it would increase the cost of end customers in this area.”
To describe how much something will affect you. Assume you reserve a hotel room for two nights at Rs 900 per night. Prior to the GST council announcement, you were forced to pay a total of Rs 1,800, with no GST applied. However, beginning July 18, 2022, a 12-percentage-point GST will be charged. You will be charged Rs 1800 + Rs 216 as GST. You will be charged a total of Rs 2016 for hotel room expenses.
Small hoteliers, on the other hand, may still be exempt from paying GST. “As a reprieve, extremely small-scale hotels would continue to be exempt from GST if their yearly earnings are less than the taxable ceiling of Rs 20 lakh,” Harjani explains.