08 Apr 2019Posted By: Mudit Handa


How much GST on Hotel Business?

Goods & Services Tax is undoubtedly the most remarkable economic reform that is steadily leading the nation towards the path of excellence. Evidently, the GST law is has covered almost all types of traders and business under its ambit.

Today, various traders having GST registration have witnessed great enhancement in ease of doing business.

The GST regime in India has played a vital role in the hospitality industry. Whether you own a small eatery or a 5-star hotel, you need to fulfil the GST compliance separately as per your business form. The GST regime has altogether simplified the structure of indirect taxation for the hotel businesses.

 

1. How were Taxes applicable on Hotels before GST registration

Before GST was implemented, indirect taxation was very complicated for the hospitality industry.

  • In various states, there were multiple taxes, including VAT, entertainment tax, and the service tax.
  • The high and complicated taxes gradually reduced the profit margin of the hoteliers.
  • Besides, hoteliers also had to face complex paperwork due to these multiple taxes, when it came time to file and had to file numerous tax returns.

2. How has GSTT rollout? eased the hotel business?

No doubt, the GST regime has simplified the hotel business up to much extent. A large number of individual taxes are now replaced with single GST tax. Now, the hoteliers having GST registration simply charge their customers with applicable GST rate on the services. Besides, they have now got rid of multiple tax returns and need to fulfil GST return filing every month.


3. How does GST apply to hotel rent?

Earlier, there used to be a flat GST of 18% on hotel rooms. To this, the government gave further relief by the way of imposing GST tax on lodge service based on the transactional value rather than the declared tariff. This reform was introduced at the 28th GST council meeting on 21st July 2018.

However, recently in the 37th GST Council meeting, the GST rates on the Hotel room rentals have now been reduced. Until now, GST rate on hotel room tariffs up to ₹7500 & above was 28%. This has been reduced to 18%. 

The most recent GST rates on the hotel room rentals are explained below in the table:-

Hotel Room rent per night (in ₹)

Rate of GST (%)

 1000 or less

Nil

 From 1001 to 7500

12%

 Beyond 7501 

18%

 

Know in detail about the .


4. Whether hoteliers are able to claim input of GST paid?

It can’t be negated that the food & hospitality industry can now much more easily claim and avail input tax credit fully on their inputs. Prior to the GST rollout, the input taxes (such as on the raw material for food, cleaning stuff, beds, etc.) were not easily adjustable against the output tax. This has really become easier in the GST regime.

Now, whether you are running a restaurant or a food truck, you can simply deduct the tax paid on inputs from your current GST liability. This input tax can be carried forward to settle the future GST liability.

5. What else do we need for hotel business apart from GST?

By now, the significance of GST registration for a hotel business is quite clear. Apart from that, the basic requirement for a hospitality business is ensuring food & health safety. And for that, you require FSSAI registration.

FSSAI registration or the food license is necessary at the initial stage while beginning a food business. Whether it’s about food manufacturing or processing, packaging or transportation of the food, all food businesses require an FSSAI registration. The key objective of getting FSSAI registration is to ensure that safe, hygienic, wholesome and nutritious food is available to the customers.

 

In case you have any query regarding Online GST registration procedure or FSSAI registration feel free to contact us at 8881-069-069.

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