GST credit relief for hotels in the works

The government proposes to allow ITC for booking hotel rooms below Rs 7,500 a night. This will also extend to other services provided by a hotel on its premises, such as restaurants, spas, fitness centres and salons.

Industry insiders say such a step would considerably increase cost efficiency across the ecosystem, but they are also sceptical of the fine print, which they fear might not be as attractive as promised.

Over 60% of India’s hotel inventory lies in the budget and mid-scale segment, and a streamlined ITC framework can reduce the cascading tax impact and provide greater pricing flexibility, ultimately benefitting consumers. Aashish Gupta, consulting CEO, Federation of Associations in Indian Tourism & Hospitality (FAITH), said GST, as originally envisaged, was a tax only on value-added services, and tourism is a lengthy value chain with multiple stakeholders across hotels, tour operators, travel agents, tourists transporters and other service providers. “Any GST amendments which unlock set-offs to the tourism industry and release tax credits are always good for both the operator and the customer. The proposed changes are directionally positive for the sector and allowing input tax credit for hotels in the lower-priced segment would improve the economics of operating and investing in this part of the market.”