Holidays to become costlier from July 18 as all hotel rooms to be taxed under GST

Those looking for a vacation on a budget should be prepared to pay more for their hotel rooms from July 18, 2022. That's because the Goods and Services Tax (GST) Council has announced that from July 18, even hotels with a rate of less than Rs 1,000 per day will come under the Goods and Services Tax net.

According to a GST Board press release dated June 29, 2022, "Hotel accommodation priced at Rs 1,000 per day is subject to 12% tax." (However, the government has not yet issued an advisory about it.) Until now, the GST exemption was available for hotel rooms up to Rs 1,000 per day.

Poonam Harjani, Leader, Indirect Tax Research & Advisory, Taxmann.com, says: “So far, the services provided by a hotel, inn, guest house, club or camp for residential or residential purposes, have the supply value for the accommodation below or equal to Rs 1,000 per day or GST equivalent. The GST Board has recommended withdrawing this exemption and applying a GST rate of 12% to it. With this revised amendment, all hotels that have declared a rate of Rs 7,500 or less will be subject to GST at a rate of Rs 7,500 or below will be liable to GST at the rate of 12 percent. However, a GST on low-cost hotels would make vacations more expensive for the common man."

Post-July 18, 2022, the GST that will be charged on a hotel room will be as follows:

Abhishek Jain, Partner, Indirect Taxation, KPMG India says: "The government is trying to withdraw the exemption from hotel accommodation priced at Rs 1000 per day and as such such accommodation is taxed at 12%. previously introduced the The government will expand the tax base, but will increase the cost for final customers in this sector”.

To explain how it affects you. Let's say you booked a hotel room for two nights at a cost of Rs 900 per night. Before the announcement of the GST Board, he was required to pay a lump sum of Rs 1,800 and was not charged GST. However, as of July 18, 2022, GST will be charged at 12%. You will need to pay Rs 1,800 plus Rs 216 as GST. The total amount you will pay will be Rs 2016 as hotel room rate.

However, small hoteliers may still get relief from paying GST. “As a respite, very small hotels will remain GST-exempt if their annual income is below the taxable limit of Rs 20 lakh,” says Harjani.

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