All about GST on Hotels and Restaurants

In this blog, there is detailed information on the GST on hotels and restaurants, GST rate on restaurants, GST on hotels, Taxes on restaurants, and other information on Goods and Service taxes (GST).

In terms of employment, GDP,  and export promotion, India’s hotel and restaurant sector is one of the oldest and largest contributors to the country’s economic development. Let’s have a quick look at what is GST (Goods and Service Tax) before going towards the tax rate on hotels and restaurants.

What is GST (Goods and Service Tax)?

The Goods and Services Tax (GST) is a tax imposed on goods and services. It is an indirect tax that has mostly superseded many other indirect taxes in India, such as VAT, services tax, and excise duty. The Goods and Service Tax Act was passed by Parliament on March 29, 2017, and into effect on July 1, 2017. In India, the Goods and Services Tax (GST) is a multi-stage, destination-based tax that is levied on every value addition. GST (Goods and Services Tax) is a single domestic indirect tax law that applies to the entire country.

Importance of GST (Goods and Service Tax)

• With the implementation of the GST, it has simplified the taxation process for the services and commodity businesses in a country.

• GST brings uniformity in the Taxation process, along with that it will be easy for the taxpayer to file an Income Tax Return.

• It allows centralized registration, points towards positive growth of the country’s GDP (Gross Domestic Product)

• GST (Goods and Service Tax) brings regulation and accountability to unorganized sectors such as the textile industry.

All about GST on Hotels

The GST rate that applies to hotels, guest houses, clubs, campgrounds, and other places where people stay for a short period is determined by the facility, star rating, and room rent per day charged.

GST rates with effect from 1st October 2019 are as follows

Rooms in hotels with a daily rate of less than INR 1000

When renting hotels, guest houses, campgrounds,  clubs, or other commercial venues for residential or lodging purposes where the room rate is less tan Rs. 1000 per room, per day, it will be exempted from GST.

Rooms in hotels with a daily rate of less than INR 7500

When hiring hotel rooms, or guest houses, you will be charged 12% GST where the whole amount of ITC (Input Tax Credit) can be claimed. In addition, the same GST rate would apply to clubs, campsites, and other commercial locations used for residential or lodging purposes with room tariffs of INR 1000 or more per room per day but less than INR 7500.

Rooms in hotels with a daily rate of more than INR 5000

Accommodation at hotels, guest homes, clubs, campgrounds, or other commercial places meant for residential or lodging purposes, where room rent ranges from Rs.7500 and higher per night per room, is subject to an 18 percent GST rate.

Information on GST rate on restaurants

Depending on the type of air-conditioning facilities available, the GST rate for restaurants will apply. If the establishment serves alcohol, the tax rate will be different.

Restaurants that are not air-conditioned and do not have a liquor license

The GST rate of 5% applies to the supply of food and beverages in a restaurant that does not have air conditioning or central heating at any time of the year and does not have a liquor license.

Air-Conditioned Dining Establishments

The taxable value of food/drinks supplied in a restaurant with air conditioning or central heating at any time during the year is subject to an 5% GST rate.

Restaurants with a Liquor License

The supply of food/drinks at a restaurant with a liquor license is subject to the 18 percent GST rate.

Services by cloud kitchens/central kitchens

service provided on supply of food, by cloud kitchens/central kitchens will attract 5% GST.

Benefits of GST (Goods and Service Tax)

• Consumers’ Clarity

For the average person, it was sometimes difficult to distinguish between a VAT and an entertainment tax. Customers would see only one charge on their statement under the GST regime, which will offer them a clear picture of the tax they are paying.

• Availability of ITC (Input Tax Credit)

Input tax credit (ITC) will be easy to claim and obtain for the tourism and hospitality business, and they will receive a full ITC on their inputs. Before GST, the tax spent on inputs (raw foodstuffs for meals, cleaning supplies, and other) could not be easily offset against the product. However, under the GST regime, this will be easier.

• Ease of Administration

GST will eliminate a number of other taxes, resulting in fewer procedural steps and greater opportunities to streamline the taxation process.

Conclusion

The hospitality industry stands to benefit from the Goods and Service Tax because of the harmonized and uniform tax rates, as well as the easy and improved utilization of input tax credit. The sector is attracting more international travelers than ever before as the ultimate cost to the end consumer drops.