In the winter, a thin haze envelopes the mountains of Chikkamagaluru and Kodagu. The lush forests are peppered with homestays, over which the cloud of the Goods and Services Tax (GST) regime now hangs ominously.
Since July, a tax rate of 18% has been applicable on bookings, placing the small homestays — homes where a maximum of five rooms can be let out to guests — on the same tax slab as the big hotels and resorts. Numerous homestay owners have written to the GST Council, the Prime Minister’s Office, and the State and Central tourism authorities explaining how this move will eventually kill the sector.
In his letter to the GST Council, one homestay owner has noted that on a tariff of ₹4,000, GST of ₹720 is applicable — something that could lead to the collapse of an industry encouraged to make up for the shortfall of hotel rooms in key tourism regions. “At present, I bear this extra cost as putting it on the customer will see a drop in bookings. It feels like a penalty on homestays that transact by cheque or online payment. If I were to transact in cash, I would get away without GST,” said Mathais, the owner.
Prior to the introduction of GST, homestays, which enjoy special incentives under the State’s tourism policy, paid just an annual fee for categorisation as ‘Gold’ or ‘Silver’ class, and those eligible would pay a service fee on the room (9% tax on roughly 60% of the tariff). Now, it is a blanket rate of 18%.
There are 381 registered homestays in the State, and many more unregistered ones. In Kodagu, where nearly two-thirds of the State’s registered homestays State are located, bookings through online portals have fallen.
“On one portal, we have had more than 5,000 views. The conversion rate has been very low, at less than five a month. GST has had an impact. Per person, one will have to pay ₹700 extra, which is a deterrent for a segment that caters to budget travellers,” said Navin Poonacha, Web consultant for the Coorg Homestay Association.
With “much confusion” still, many homestays — which deal in cash — are not charging GST, assuming exemption as agricultural income.
Tourism Minister Priyank Kharge said the State has presented multiple requests to the GST Council to reduce the tax rate to 8%. “If you want tourists, then you should lower taxes, like in Southeast Asia or Australia. It is going to be difficult for homestays to survive, and it undoes a State policy encouraging tourists to experience local cultures and cuisine,” he said.
