Impact of GST on the Indian Hospitality Sector

Goods and Services Tax, or GST! This seems to be the word everyone is treating with complete trepidation. There is still a lot of uncertainty and wariness in what the next few months will bring, and what all changes need to be made.

So how does GST affect the Indian hospitality sector? Just a few days back, the GST council provided a slight sigh of relief to mid- market and luxury hotels by stating that only rooms with a tariff of Rs.7,500 and more, and not Rs.5,000 as declared earlier, would have a GST of 28%. Hotel rooms with a tariff between Rs. 2,500 to Rs. 7,500 would have a GST of 18%.

The GST on room tariffs proves to be a double-edged sword; before GST a hotel room with a tariff of Rs. 5000 would attract about taxes amounting to about 20%, therefore, the same room would be priced at Rs. 6000 before GST and Rs. 5900 after GST. On the flip side a room with a tariff of Rs. 7500 with taxes would be priced at Rs. 9000 before GST and Rs. 9600 after GST. It will only be logical if the hotelier fixes the price at Rs. 7499 so that the final amount to the customer will be around Rs. 8850 as it falls under the 18% tax slab.

Many hotels, nowadays, have some sort of dynamic pricing (done manually), which fluctuates depending on demand and supply. Now since the GST also varies depending on the tariff, hotels need to ensure that their billing system or PMS is able to alter the tax as per the pricing of the room across all their distribution channels. The first few months may require some double checking, but PMS software, such as Hotelogix is already GST ready to make the transition trouble free for hotels.

A slight relief to the luxury hotel segment is that the GST on their restaurants has been revised. Initially, the council planned to impose a GST of 28% on the restaurants at luxury and five-star hotels, but after a lot of opposition from the Indian hospitality sector they brought it down to 18%. Thus there wouldn’t be much of a difference to what customers would be paying, if anything it works in the guest’s favor.

Luxury hotels may see a drop in occupancy in the coming months since there would be a significant increase in their pricing, but for the other hotels, it would pretty much be work as usual, apart from just double checking that the GST norms are being followed accurately.

Have you implemented GST in your hotel management software? What challenges are you facing now? Have you considered adopting a GST-ready hotel management software?