Goods and Services Tax (GST) is touted as one of the biggest reforms of Modern India. GST has got some sectors of the Indian economy delighted, while some are disappointed while the rest are a bit confused about it. GST is expected to add almost 2% to India’s GDP. Spare me the calculation but hey! that is a huge amount! Let us see the Impact of GST on Indian tourism sector.
As a consumer of Tourism and hospitality services, a single tax-structured bill should save up to 10-15 percent on the overall bill. Entertainment, luxury, and other service taxes in the hospitality industry shall attract a rate of 18% as against the existing 20-27%.
The impact of GST on restaurants:
According to the National Restaurant Association of India’s 2013 India Food Service Report, the current size of the Indian food service industry is ₹2,47,680 crore and is projected to grow to ₹4,08,040 crore by 2018 at the rate of 11%.
Gains to the restaurant sector:
- Overall cost of procurement of raw materials will go down
- Since most items used in the restaurant industry like food grains, milk, eggs, curd, common salt, unbranded besan, sugar, tea, edible oils etc. are either exempt from GST or are in the 5% GST bracket, the restaurant industry has a lot of positive takeaways.
- Though the entire restaurant industry will benefit from GST, cloud kitchens and Food delivery businesses will be most benefited.
As Shitiz Dogra, co-founder of Firsteat.in puts it, “With slightly lower procurement costs GST will make it easy for the restaurants to take credit of input goods and services consumed while providing restaurant services.”
Understandably, the cloud kitchens and Food delivery services are the happiest about GST and the high-end AC restaurants are a bit somber due to high tax rate!
The impact of GST on Accommodations in India
Accommodation forms a major part of a traveler’s journey. Earlier, Hotel owners were tense as room worth INR 5000 a night would have taxed at 28% but now the rooms above INR 7500 will be taxed at 28%. The tax slab shows that travelers should prefer budget rooms that cost less than INR 1000 per night.
However, I am wary if they would be the right choice for a traveler after a long flight! Especially, if situated in a shady area of a city, such a hotel room might just ruin the traveler’s experience!
The impact of GST on Bed and Breakfast accommodations
Most of the BnB owners offer Breakfast (unless the traveler is really on a tight budget) to the travelers. They handpick the source of the ingredients by ensuring that they are safe and economical. Thus, the cost of BnB rooms will be either same or lesser. Apart from that, since BnB’s do not have to pay the luxury tax or service tax up to a certain limit, they are charged water and electricity tariffs at domestic rates, unlike hotels. So when you are coming to India, you could seriously consider staying in an Indian home with an Indian family!
Though there has been chaos in the Indian economy due to GST. Don’t we crib about the rising corruption in India by referring to a low rank in World Bank’s Ease of Doing Business report. In my opinion, GST is a step in the right direction! Read our blog on India in Global tourism scenario
India has a higher rate of taxes than the neighboring South East Asian countries. However, GST will still lower the previous tax rate and may need revising them again in the near future. I think we should all welcome it and make it a part of our lives.
PS. I would recommend you consult your CA and clarify your doubts on the GST rate. Shoot your queries through to @askGST_GoI (Official Twitter handle of Government for queries on GST) through your twitter handle.