The Goods and Services Tax may simplify the complex, pre-existing tax structure but what does it really mean if heavy taxes are levied on your favourite restaurants? T+L finds out.
With the Goods and Services Tax all set for a July 1 roll-out, the Council on Friday announced the percentage of tax to be levied on various players in the hospitality and tourism industry. 12% is to be levied on non-air-conditioned restaurants, with an 18% tax levied on air-conditioned eateries as well as places with an alcohol license.
Five-star hotels, however have it much worse with 28% being levied on them, while differential tax will also be implemented on hotel rooms based on the per-night tariff. Rooms being charged at Rs. 5,000 and above will feel the heaviest pinch being taxed at 28%. Those with a tariff of Rs 2,500-Rs 5,000 will attract 18% tax, rates between Rs 1,000-Rs 2,500 will be taxed at 12% and below Rs 1,000 a day will be exempted entirely. Small restaurants with an annual turnover of less than Rs 50 lakh will be taxed at 5%.
Post the announcement, mixed reviews have floated through the media, with a majority expressing outrage and disappointment. They believe that heavy taxes could be a deterrent to the tourism and hospitality industry in India, a sector that has the potential to be a top contributor in generating revenues for the nation apart from providing thousands with a job. Some have even suggested taking it up with the Union Finance Minister, Arun Jaitley and the GST Council to move these services to a lower tax bracket.
Comparisons have been made to other nations explaining the taxes their hospitality and tourism industry have to pay. Places like Singapore and Thailand pay taxes in the range between 5% and 10% and attracted as many as 15.2 million and 32.6 million tourists in 2016 respectively. In contrast, India managed to attract only 8.03 million. It has always been a hurdle earning foreign revenue in this sector owing to the preexisting tax structure and it is uncertain whether there would be any change in the decision that has been made. – Sujitha Sundaram