‘GST rates will impact hospitality sector’

Troubled times: An aerial view of beach road in Visakhapatnam.   | Photo Credit: K_R_DEEPAK

A holiday in a star-category hotel or a family dinner in your favourite air-conditioned restaurant is set to burn a deeper hole in the consumer’s pocket, following the 12 to 28 % Goods and Services Tax (GST) rate levy on the hospitality sector. The new rates will come into effect from July 1.

While scores of restaurants in the city remained shut on Tuesday in protest against the high GST rates, hoteliers have termed it as a “killer step” for the tourism and hospitality industry, which is already reeling under rising costs of basic commodities, labour and the recent liquor ban on highways.

At a time when the Andhra Pradesh Tourism Authority stepped up its campaign to bring in more domestic tourists to the region through its ‘Let’s Vizag’ campaign, the high tax slab for the sector under GST may have a retrograde impact on the tourism industry, say the hotel industry players.

According to industry estimates, the total losses are estimated to be around ₹ 500 crore for the whole hospitality sector in India.

“It will certainly have an adverse effect on the industry, particularly for the mid and high category hotels which will fall under the 18 and 28 % GST rate. A weekend holiday package for a couple that earlier would cost ₹ 10,000 to ₹ 12,000 will easily go up to ₹ 20,000 now. We are expecting immediate fallout of this with a drop in footfall to hotel restaurants. In the long run, hotels in the city may look at bringing down average room rates (ARR),” said Palm Beach General Manager and Hotel and Restaurant Association of AP general secretary Sandeep Reddy.

A sea front hotel manager termed the high tax rate under GST as a “disaster”.

“GST Council should do away with the contentious 28 % tax slab for the services industry. There is not much difference between a four-star and a five-star category hotel. But under the proposed high tax slab will adversely impact the premium category hotels,” the hotel manager said.

Under GST, hotel room rates between ₹1,000 and ₹ 2,500 price bracket will attract 12 %, 18 % for tariff range between ₹ 2,500-5,000 and hotels with room tariffs above ₹ 5,000 will attract 28 % GST rate.

Restaurants with a turnover of ₹ 50 lakh or below will be under the 5 % composition, according to the newly proposed rates.

According to city based restaurateurs, this may augur well for the business of food trucks which is already booming in the city.

“Food truck businesses will grow as they will be not impacted at all,” said Seshagiri Mantri of Vihar Hospitality. While GST rates may not reduce footfalls, Mr Mantri added that in some cases, the hotel owners may have to bear the cost to stay competitive when offering packages.

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Printable version | Jan 19, 2021 3:08:59 AM |

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