Hotel accommodation in rooms with tariffs less than Rs 7,500 per day will attract the moderate tax rate of 18% under GST, even in five-star or luxury hotels, the government sought to clarify today. The Central Board of Excise and Customs issued the clarification on Tuesday in response to reports that luxury hotels and five-star establishments are liable to be taxed at the highest slab rate of 28% under GST.
“Star rating of hotels is… irrelevant for determining the applicable rate of GST,” the CBEC said in a note. It said: “In this context, it is hereby clarified that accommodation in any hotel, including 5-star having declared tariff of less than Rs 7,500 per unit per day, will attract GST at the rate of 18%.”
Earlier this month, India implemented the Goods and Services Tax (GST) in its biggest tax reform since independence, seeking to unify the entire country into a single market with one tax structure across states. Under the new regime, hotel rooms with tariffs below Rs 1,000 per day will attract zero tax, those below Rs 2,500 will be taxed at 12%, while staying in rooms with tariffs between Rs 2,500 and Rs 7,500 will be taxed at 18%. The highest slab of 28% tax has been reserved for only luxury hotel accommodation, which, with the latest clarification, can be defined as the one with tariffs above Rs 7,500 per day.
However, the catch word here is “declared tariffs”. Customers must note that the GST rate applicable on the particular room accommodation would be determined on the tariff declared in the rate card by the establishment, and any discounts or deals availed from the third party booking apps or travel agents might not be considered in determining the tariff. Though there is no apparent communication on this yet from the government.
Abhishek Jain, Tax Partner, EY India welcomed the government move to clarify the confusion. “There was bit of an ambiguity on whether 5-Star hotel having tariff below INR 7500 per unit per day would attract GST rate of 18% or 28%. The Government has rightly clarified that any hotel, including 5-Star hotel, having tariff of below 7500 would attract GST rate of 18%. This would put the controversy at rest,” Abhishek Jain said. He also hailed the government’s approach to proactively address industry concerns over the implementation of GST. “What is commendable is the manner in which the Government is taking cognisance of industry issues and concerns and is clarifying them proactively,” Jain said.