The Impact of GST on Tourism in India

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%.

Lip smacking dishes in India could be cheaper after GST!
Many lip smacking dishes in India could be cheaper after GST!

Gains to the restaurant sector:

  1. Overall cost of procurement of raw materials will go down
  2. 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.
  3. Though the entire restaurant industry will benefit from GST, cloud kitchens and Food delivery businesses will be most benefited.
Food ingredients and GST- BnBNation
Most Food ingredients are either exempted or at a low level of GST rate.

Indian restaurant market scenario

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

Impact of GST on Hotels- BnBNation
Impact of GST on Hotels

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!

"All I need is a cosy abode much like my home"- Anonymous
“All I need is a cosy abode much like my home”- Anonymous
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!

Check out our cherry-picked BnB’s in Delhi

Conclusion:

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.

Here’s why staying in a BnB is better than staying in a hotel

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.

Read more:

The Restaurant Times article

Economic Times article on GST

23 thoughts on “The Impact of GST on Tourism in India”

  1. Initially when GST is introduced it does cause confusion, but in the long run it is beneficial .It does take some time for people to adjust and get use to the concept.

  2. Here in the Philippines we have a high tax on goods etc. 12% VaT – value added tax. Plus service charge on some restaurants.

  3. Any change is first protested against. I am glad you shared this article. It shows that we will overall benefit in the tourism space, so I am good 🙂

  4. Admittedly I had to read this twice to fully understand what GST is and how it correlates with tourism in India. I think it’s a relief that it hardly affects BnB accommodation. As a budget traveler, I’m always looking for the cheaper options. So at least now I know where should I stay if I ever get to India and budget is one of my foremost considerations.

    1. Hi there,
      It was heartening to follow the developments in the lead up to the GST. In the end, Government has rewarded the ones’ who provide travelers an authentic experience of Indian culture through Bed and Breakfast rooms. You are most welcome to visit India anytime and would be too happy to assist you!

  5. Interesting article on GST. You are right GST has divided the population into three, happy, angry and confused. The last one accounts for the majority, I guess. Though the aims of the GST policy are lofty. Time will tell whether it has its desired impact or not.

  6. GST is a big change and every big change brings with it anxiety and confusions. But things will settle finally and hope it will be for the good of us all. This post will really help people understand the effect of GST

  7. This is a really helpful post. GST has caused so much confusion and chaos that I needed someone to put the impact in a simple way. Thanks for sharing!

  8. Today morning only we were discussing about the impact of GST on tourism sector and didn’t had much clue on the same. So, this article was the need of an hour and your charts have made it quite easy for us to understand. We are really happy with its implementation. Hopefully, the things will get aligned and it will have positive impact overall.

    1. I am glad to help you out Suruchi! I love the way you write and explain things through your blog and I’m glad you were able to understand the elements of my blog as well!

  9. The introduction of GST has now doubt created enough chaos in the nation, and I think it’s going to take time for everyone to understand the impact and the outcome in each sector can’t be predicted very early. But as you say, for budget travelers however, things are going to be the same more or less!

    1. Hi Reshma,
      Glad that you liked the blog. GST will be good for India and will increase transparency. With almost 80% of the items being coming under 18% tax bracket, it will be good for the entire economy. I’m optimistic!

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