The Goods and Services Tax (GST) Council said that from July 18 hotels charging less than Rs. 1,000 per day would be subject to GST. According to a news release 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.
"So far, services offered by a hotel, inn, guest house, club, or campsite for residential or lodging purposes, with a value of supply of a unit of accommodation less than or equal to Rs. 1000 per day or equivalent, were exempt from GST," says Poonam Harjani, Leader, Indirect Tax Research and Advisory, Taxmann.com.
The GST Council has suggested repealing the exemption and replacing it with a 12% GST rate. With this rate change, all hotels with reported tariffs of Rs. 7500 or less would be subject to GST at the rate of 12%.
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 this change will affect you, assume that you reserve a hotel room for two nights at Rs 900 per night. Before the GST council announcement, you were required 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.
