There will be no tax relief for five-star luxury hotels as the GST Council is unlikely to reduce the 28% GST tax on luxury hotels with tariffs of Rs 7,500 and above, officials familiar with the developments said. Five-star hotels are being perceived as ‘sin’ goods and the government does not want to tinker with tax rates of hotels ahead of the general elections, especially when issues such as agrarian distress are still raging, officials said. Hoteliers have been lobbying for a tax cut for five-star hotels for a while now as they believe it has impacted business and that the 28% GST rate makes Indian hotels the most highly taxed in the world.
On Tuesday, PM Narendra Modi had said that 99% of over 1,200 goods and services will attract 18%, or less, goods and services tax. The GST Council, chaired by finance minister Arun Jaitley, will meet on Saturday and has pruned the 28% tax slab by cutting rates on 191 goods over the past one and a half years. Currently, 35 items attract the 28% GST tax rate besides services rendered. GST on rooms with tariff of Rs 7,500 and above is 28%, while rooms with Rs 2,500-7,500 tariff attract 18% tax. Hotels and lodges with a tariff below Rs 1,000 a day are exempted from GST, while those with a room rate of Rs 1,000-2,500 are taxed at 12%.
As per a research conducted by consulting firm HVS previously, primary GST rate of 28% on hotels would have made star category hotels in Indian cities the most taxed in the world, surpassing those in New York, London and Paris, excluding add-on levies such as municipal tax and service charge. “If one were to put aside other costs on an ‘apples-toapples’ comparison, not a single state was levying such a high tax on its guests as it will now be the case with this new tax regime,” HVS had stated.