Winter has luxury hotels in a sweat

  • Pre GST:
The hospitality industry, like every other sector in the Indian economy, was liable to pay multiple taxes (VAT, luxury tax, and service tax) under the previous VAT regime.
  • Post GST:
Hotels have been taxed under different slabs based on room tariffs but hoteliers lack of clarity in the industry on whether this was applicable on the rack rates or the invoice value.  
  • Luxury hotel owners in other leisure destinations and chains are anticipating a drop in occupancies for the upcoming winter season, given the 28% GST slab on rooms with tariffs of Rs. 7,500 and above.
  • Every five-star is showing a dip of more than 20% in revenues.
Consumer behaviour:
  • The behaviour of the customer’s post GST has been very restrictive. With over all prices going up per night the customers are not willing to pay. This behaviour has directly or indirectly affected the Big-Fat-Indian-wedding business as well.
  • Average rates for some luxury rooms in leisure destinations are around Rs. 50,000 in winters. For a Rs. 50,000 room, customers end up paying Rs. 14,000 as tax. This is hurting the customers and hence leisure bookings are affected.
Expert opinion:
  • Goa’s five-star hotels have seen a steady drop in occupancies over the past two months ever since the introduction GST rates says Braganca former president of Travel &Tourism Association of Goa.  
  • Kapil Chopra, president, Oberoi Group.  
Believes that 28% tax on hotel rooms is unsustainable. Not only there is an impact on foreign tourism in a significant way, but even domestic tourists have a big problem paying tax.
Such a tax slab is bound to hit domestic leisure.

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