As per a press release issued by the GST council on June 29, 2022, “Hotel accommodation priced up to Rs 1000/day shall be taxed at 12%.” (However, the government is yet to issue a notification in this regard.) Up until now, GST exemption was available for hotel rooms up to Rs 1,000 per day.
Poonam Harjani, Leader, Indirect Tax Research and Advisory, Taxmann.com says, “So far, services by a hotel, inn, guest house, club or campsite for residential or lodging purposes, having value of supply of a unit of accommodation below or equal to Rs. 1000 per day or equivalent has been exempt from GST. The GST Council has recommended to withdraw the said exemption and apply 12% GST rate thereon. With this rate amendment, effectively all hotels having declared tariff of Rs. 7500 or below will be liable to GST at the rate of 12 percent. That said, levy of GST on low-cost hotels will make the holidaying more expensive for common man.”
Post-July 18, 2022, the GST that will be charged on the hotel room will be as follows:
|Hotel room cost||GST rate|
|Up to Rs 7,500||12%|
|Rs 7,501 and above||18%|
Abhishek Jain, Partner, Indirect Tax, KPMG India says, “The Government seeks to withdraw the exemption for hotel accommodation priced up to Rs 1000 per day, and as such the said accommodation shall be taxable at 12%. This change has been introduced by the Government to widen the tax base but will increase the cost of end customers in this segment.”
To explain how much this will impact you. Let’s say you book a hotel room for two nights costing Rs 900 per night. Prior to GST council announcement, you were required to pay total amount of Rs 1,800 and no GST was levied on it. However, from July 18, 2022, onwards, GST at the rate of 12% will be levied. You will be required to pay Rs 1800 plus Rs 216 as GST. The total amount payable by you will be Rs 2016 as hotel room charges.
However, small hoteliers may still get relief from paying the GST. “As a respite, very small-scale hotels will still not be covered under GST if their annual revenues are less than taxable limit of Rs 20 lakh,” says Harjani.