The tourism and hospitality industry is upbeat over the reduction of Goods and Services Tax (GST) from the 18% slab to 5%. It indeed rings auspicious bells for hotels in Tirupati, which witnesses a high floating population in the form of 50,000 visitors a day. However, the removal of input credit has the hotel sector grumbling.
The hotels expect higher footfalls once the tax rate has been brought down significantly from a whopping 18% to an affordable 5%. Though just a day has passed after the implementation of the new tax slab, which has not caused any noticeable change, the industry is confident of more business.
When the tax rate was 18%, the government facilitated input credit of 18% on commodities, say groceries, purchased. This effectively means facilitation of reduction of the input tax from the tax payable on the food product, collected in the form of bill from the customer. Though the tax rate has come down to 5%, thus benefiting the customer, the removal of input credit is actually a burden on the hotels, which has to bear the 18% input cost. This is precisely the reason for many hotels not passing on the benefit of tax reduction to the end user. Another anomaly is the elimination of outdoor catering units and banquets from the purview of this tax reduction. “The use of the word ‘restaurant’ in the order virtually shuts the door on parallel avenues like banquet halls, though the food cooked in the same kitchen is served there too,” rues M. Balakrishna Reddy, Executive Director of Bliss group of hotels, who is also the executive member of South India Hotels and Restaurants Association.
In order to placate their customers, some hotels may resort to immoral steps like billing their banquet dinners (18%) to the restaurant (5%).
