The Indian tourism industry is growing at a rapid rate. This industry contains two major components are hotels and restaurants. The hotels are the backbone of the tourism industry, so they must be operated seamlessly to keep the economy running.
Hence, to operate a hotel in India, you must know everything about this taxation. In this blog post, we will look at a guide to GST in the hotel industry.
GST stands for Goods and Services Tax. The Act states that any services that are provided by the hotel in taxable under GST. This act provides different tax rates for different room prices in the hotel.
The Good and Services Tax provides uniform tax rates for the hotels, that are easy to get along with. This tax also allows better utilization of input tax credit and in time decreases the rates for the consumer, which attracts more guests.
| Room price less than ₹1,000 | No GST applicable |
| Room price between ₹1,000 – ₹7,499 | 12% GST applicable |
| Room price is ₹7,500 or more | 18% GST applicable |
Good and Serivces Tax is further categorized into CGST and SGST which are applicable at central and state levels respectively. IGST or Integrated GST applies to interstate imports and transactions.
According to the hotel law in India, to charge GST from their customers, an individual or business should be registered under the Goods and Services Act. Similarly, a hotel owner should be registered to charge this tax from its guests.
It is mandatory for the hotel to get registered under this act if its yearly turnover is equal to 10 lacs or more. However, if the hotel’s yearly turnover is less than ₹10 lacs, it’s not mandatory to get registered under this act.
Moreover, If you have registered the hotel on OTA for online distribution such as MakeMyTrip, Oyo or any other and the hotel’s yearly turnover is less than the specified limit (₹10 lacs), then it’s not mandatory to get registered.
Nowadays, it is very common for hotels to receive bookings from OTAs. In this scenario, if the hotel’s turnover is less than the specified limit and it is also not registered under the Act, then the OTA provider is liable to charge the OTA Commission on the transactions.
If the hotel is registered under Goods and Services Tax, then it can charge directly from its guests. In such cases, the OTAs are supposed to deduct 1% for TCS (Tax collected at source) on the bookings.
ITC stands for Input Tax Credit. It enables hotels to claim the tax credit for the tax paid on goods and services they use for their business operations. It consists of various expenses such as raw materials, hotel furniture and maintenance services. The hotel owners must maintain the proper records of the invoices and ensure compliance with ITC.
If you provide taxable services such as accommodations for the business class, and your business guests have GSTIN of another state, then the hotel has to charge CGST and SGST.
Also, the company is eligible to claim ITC, if the hotel is same state as the business guests or where the company is registered.
If you own another property that is established in another state and want to move the goods interstate which are valued above ₹50,000, then you need to generate the Electronic Way Bill (E-Way bill).
The E-Way bill contains details like the consignment’s value, GSTIN of both supplier and recipient, and mode of transportation details. An e-Way bill is mandatory if you want to avoid the penalties.
The hotels generally engage in various contracts for various contracts. As per the regulations, hotels are required to deduct the TDS at a specified rate which is 1% of the payments made to the vendors.
The deducted TDS should be transferred to the government and relevant TDS certificates must be issued to the vendors.
The hotels need to file the returns periodically to provide information on the sales, purchases and tax payments to the government. The frequency of filing returns depends on the hotel’s annual turnover.
In conclusion, understanding of Good and Services Tax in the hotel industry is crucial for hotel owners in India. Is has simplified the tax process for hoteliers as it has replaced multiple taxes with a single tax.
With good knowledge of Goods and Services Tax and following the regulations, the hotels can ensure smooth operations in the dynamics of the Indian tourism industry.
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