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IMPACT OF GST ON THE HOSPITALITY SECTOR

Friday, May 5

Hospitality industry is a versatile field encompassing accommodation & entertainment services, accounting food and beverage, event management and above all guest satisfaction. In the current tax regime, the hospitality industry is plagued by multiple taxes viz. Service tax, VAT, Luxury tax etc. leading to cascading effect. - The VAT varies from state to state-ranging between 12% to 14%. - Luxury tax depends on the room tariff and the state-ranging between NIL to 12% - Service tax varies on the type of service-hotels with tariff in excess of Rs.1000-S. tax applicable at 60% of tariff+VAT+Luxury tax. In case of restaurants on the F & B bills-Service tax applicable at 40% of the bill + VAT. Combination of all gives total of 20-27%. Also input credit from central taxes cannot be set off against VAT and vice versa. The GST with expected rate of 18% will subsume all of these taxes and bring them under one single tax. This will reduce multiple taxation and will give a boost to the hospitality and tourism industry. The effect of GST will be positive leading to a considerable reduction of tax ranging between 1-7%.Lower tax rate would attract more tourists in India. Consumers will also benefit with the single slab of tax as multiple components in the food bill in the present structure inflate the bills by 30-35%. Overall GST would be positive for the sector assuming the multiplicity of taxes will go away.

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