Pay only 18% GST, even on five-star hotel rooms. Just meet this requirement


The star rating of hotels is irrelevant in determining the applicable GST rate, the government said. (Image: Reuters)

Hotel accommodation in rooms with rates below Rs 7,500 per day will attract the moderate 18% GST tax rate, even in five-star or luxury hotels, sought to clarify today the government. The Central Excise and Customs Council released the clarification on Tuesday in response to reports that luxury hotels and five-star establishments are likely to be taxed at the top 28% GST rate.

“The star rating of hotels is irrelevant in determining the applicable GST rate,” the CBEC said in a note. He said: “In this context, it is clarified that accommodation in any hotel, including 5 star hotels with a declared rate 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 a structure single tax in all states. Under the new regime, hotel rooms with rates below Rs 1,000 per day will not be taxed, those below Rs 2,500 will be taxed at 12%, while rooms with rates between 2,500 and 7,500 Rs will be taxed at 18%. The highest 28% tax bracket has been reserved for luxury hotels only, which, with the latest clarification, can be defined as those with rates above Rs 7,500 per day.

Also read: GST Calculator: Calculating Tax Based on GST, Deductions and Rates

However, the key word here is “declared rates”. Guests should note that the rate of GST applicable to the particular lodging room would be determined on the rate stated in the rate card by the property, and that any discounts or offers offered by third-party booking applications or travel agents may not be taken into account in determining the fare. Although there is no apparent communication on this from the government yet.

Abhishek Jain, tax partner, EY India welcomed the government’s decision to clear up the confusion. “There was some ambiguity as to whether a 5 star hotel with a rate below INR 7,500 per unit per day would attract a GST rate of 18% or 28%. The government has rightly clarified that any hotel, including a 5-star hotel, that is priced below 7,500 would benefit from an 18% GST rate. It would put the controversy to rest, ”said Abhishek Jain. He also praised the government’s approach to proactively address industry concerns regarding the implementation of the GST. “What is commendable is the way the government is aware of industry issues and concerns and proactively clarifies them,” Jain said.

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