After liquor ban, GST hits hospitality hard

One month into GST and hoteliers complained that they have been hit hard in the industry. The industry’s money spinner, Meetings, Incentives, Conferences and Exhibitions (MICE) segment, which generates maximum revenue, has been following close due to the ban on liquor near the highways. There have been many cancellations or postponements of pre booked events due to the anomaly in GST-that MICE activities which are held in the hotels outside of the home state will not be eligible for an input tax credit.

The hoteliers have noticed an overall reduction in the MICE bookings in the hotels across India as compared to the same period last year. The advance bookings are being called off and new bookings are not happening. Coming back to back after the recent ban on liquor on the highways, GST has acted as a double whammy to the hotel industry which had already been suffering reduced revenues. Many establishments could be compelled to scale down the operations or shut down due to a huge decline in revenues. MICE tourism is an important and fast growing segment of the hospitality industry, the hoteliers appealed to the government to tackle this particular aspect of GST which has a potential to disrupt growth. Various hoteliers generated huge revenue due to MICE and the same are now suffering due to an adverse impact of GST.

For instance, the upcoming winter wedding season which is one of the top grossers for the banquets division of any hotel is predicted to be low this year. Corporates are holding events in the same state where they have registered under the GST, which is hitting the hoteliers. Businesses have digested the high GST but without the input tax credit, it does not remain viable. MICE tourism is a significant segment of the industry and the hoteliers want the government to look into it. On the new slabs for the hotel industry, the 28% GST on rooms for a tariff of Rs.7500 and more is one of the highest across the world and will restrict bookings as well as cash flows. Besides, the tax percentage will be determined based on the declared rate which is again creating difficulty in the industry.

Former president of HRAWI and the Federation of Hotels and Restaurants Associations of India mentioned that the corporates will now arrange their MICE in the same state where they have registered for GST or they will take their businesses abroad with lower taxes. The President mentioned that they are in touch with the Tourism Ministry and hope that the clause will be altered in order to encompass MICE for ITC and provide relief to the entire hospitality industry. This includes all the members in the industry from budget hotels to luxury hotels, the hoteliers are in unison and appealing to the Government to alter the clause and allow them to run the business as they did earlier. With a higher rate of GST and the difficulty of including MICE, the hospitality industry has been hit hard.