The government appears to be headed for a confrontation with small and medium hotels over its attempts to bring them within the ambit of Goods and Services Tax as a result of its directive to establishments that come under the ₹20-lakh annual turnover threshold to register under the new tax regime.
The issue figured prominently at a meeting convened by Finance Minister T.M. Thomas Isaac recently, with the Minister making it clear that it was mandatory for all hotels and restaurants with over ₹20 lakh annual turnover to get registration under GST.
The meeting itself materialised in the context of the inspections conducted by the GST Department on hotels and restaurants.
The Minister was apparently frustrated by the fact that only some 2,000-odd hotels and restaurants had taken registered under GST out of the over one lakh such establishments that had a fairly good turnover.
To broaden tax base
The Minister hopes to broaden the tax base and bring more establishments under the tax net in his search for additional revenue sources.
Several hotels and restaurants have either taken registration or adopted the composition scheme but the challenge before the government is to bring those who are still reluctant to join in.
However, hotel and restaurant owners are sore about the government’s approach. The Kerala Hotel and Restaurant Association rejected the government’s contention that the establishments which had an annual turnover between ₹20 lakh and ₹70 lakh should pay GST from their own resources. President Moitheenkutty Haji and general secretary G Jayapal said such a decision would lead to liquidation of the small hotel sector. These hotels catered to the not-so-affluent sections of society and usually did not levy GST on their customers.
The association would take action if its members were found to be levying GST, the office-bearers said. They also rebutted the charge that hotel and restaurants were cheating customers. Rather, the GST burden of 18% up from the pre-GST rate of 0.5% had been passed on to the customer, they said. The association also warned that it would resort to agitation if the government failed to withdraw its decision.
In the meantime, the Kerala Vyapari Vyavasayi Ekopana Samithi protested against the department’s decision to impose a fine for delay in filing returns. The samithi, in a statement here, demanded a foolproof GST network and transparent rules to facilitate filing of returns, instead of imposing a burden on the taxpayer.
