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Three different tax slabs will hurt hospitality, says industry

Suresh Nair, partner, indirect tax practice at EY said the 28% tax slab for hotels with tariffs of Rs 5,000 could lead to an effective push back.

, ET Bureau|
Updated: May 23, 2017, 01.28 AM IST
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“We are conducting GST workshops and should be able to send our concerns on the rates to the finance ministry in a day or two,” said Pradeep Shetty, a board member at the Federation of Hotels and Restaurant Association of India.
“We are conducting GST workshops and should be able to send our concerns on the rates to the finance ministry in a day or two,” said Pradeep Shetty, a board member at the Federation of Hotels and Restaurant Association of India.
NEW DELHI: Hotel and restaurant associations are set to convey to the government that the switch to goods and services tax will lead to different tax slabs and hurt the industry instead of making things simpler.

In its meeting held in Srinagar on Friday last week, the GST Council pegged GST rates for airconditioned eateries and those with liquor licence at 18%, nonair-conditioned restaurants at 12%, hotels charging room rentals between Rs 1,000 and Rs 2,500 a night at 12%, Rs 2,500-5,000 at 18% and above Rs 5,000 at 28%.

“We are conducting GST workshops and should be able to send our concerns on the rates to the finance ministry in a day or two,” said Pradeep Shetty, a board member at the Federation of Hotels and Restaurant Association of India. Shetty said the world over, rates for the hospitality sector are the lowest since tourism is a revenue grosser and biggest employment generator.

“Despite our innumerable representations, we have been put in the highest slab and saddled with three different slabs,” he said. Executives said the new rates mean that hotels charging Rs 5,000 a night in peak season, up from Rs 2,500-3,000 at other times, will be treated as luxury hotels, which does not make sense.

Suresh Nair, partner, indirect tax practice at EY said the 28% tax slab for hotels with tariffs of Rs 5,000 could lead to an effective push back. “Industry insiders may want to go back to the government for this. Clients are going through the fine print and will have internal deliberations,” he said.

Dilip Datwani, president of the Hotel and Restaurant Association of Western India, said tourists will skip India given the new GST rates since neighbouring countries such as Myanmar, Thailand, Singapore and Indonesia levy taxes ranging from 5% to 10% in the tourism sector.

Since countries such as Singapore and Thailand levy tax rates of 7%, industry association members said they had expected GST rate to be pegged at 5%.

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