Hoteliers voice concern over lack of clarity on tax on invoice value

NEW DELHI: The new GST rates caused confusion in the hotel and restaurants industry for some while others said it was business as usual.
Hotels have been taxed under different slabs based on room tariffs but hoteliers said there was lack of clarity in the industry on whether this was applicable on the rack rates or the invoice value.

Garish Oberoi, VP, Federation of Hotel and Restaurant Associations of India said that while GST brings in a much simpler system by reducing the multiplicity of taxes and that customers were happy with taxes coming down for most hotels and restaurants, hoteliers and restaurateurs had a lot of concerns and questions.

“We have escalated those to the ministry but the replies have not come yet. There are 60-70 queries on different scenarios which are yet to be answered. The query on whether the taxes are applicable on invoice value still stands. The notification mentioned declared tariff and we were told by some officials that it would be on invoice value but there is no formal announcement on this yet. We hope these queries would be addressed in a few days,” said Oberoi.

But most hoteliers said the taxes were applicable on the invoice value. “Taxes would be on the selling price. There are going to be hiccups in the short term but it is a good thing for the industry and I don’t think the consumers have taken it negatively. People are booking through the usual channels,” said Vishal Kamat, director of the Kamat Group. Kamat’s Orchid Hotel in Mumbai has rooms which are taxed at 18% and suites with tariffs of Rs 7500 and above which are taxed at 28%.

Hotels and lodges will a tariff below Rs 1,000 a day have been exempted from GST, while those with a room rate of between Rs 1,000-Rs 2,500 will be taxed at 12% and those with tariff of Rs 2,500-7500 will attract 18% tax, and a 28% slab is applicable for hotels above Rs 7500.


Oberoi said for restaurateurs there was confusion around how they would tax some items sold in their premises. GST Council had pegged GST rates for air-conditioned eateries and those with liquor licences at 18%, and non-air-conditioned restaurants at 12%.

“Cold drinks have been taxed at 28% so restaurateurs want to know whether they charge 18% given their tax slab or 28%. Similarly, some restaurants also run cakes and pastry shops in their premises. So the bread which has been categorised at 5% under GST should be taxed at 5% or 18% given it is being sold in their premises,” he added.

A spokesperson at a Yo China outlet in New Delhi said customers had multiple queries around GST and billing and that he hoped that things would normalise after a few days.

A spokesperson at Mc Donald’s centralised Mc Delivery service said the pace of orders was similar to that on any other weekend.

Dilip Datwani, president of the Hotel and Restaurant Association of Western India said there was a lot of confusion in the industry on the rates and that many establishments were not ready. “It should clear out within a few days. We are trying to help out hoteliers. We will be disseminating some FAQ circulars on Monday,” he added.

For Lemon Tree Hotels and Everstone Capital backed Massive Restaurants which runs the Farzi Café chain and Masala Library it was a regular weekend. “The rates are reasonable. We are in the process of working things out and are trying to see what benefits we have to give to customers. The tariff range of Rs 2500-7500 will matter more in winters when the rates may go up above Rs 7500 and in a few of our Red Fox hotels which are below Rs 2500,” said Patu Keswani, chairman, Lemon Tree Hotels.