26th May 2017
To All members,
Subject: GST on Tourism and Hospitality Sector
As you know a joint representation was made by FAITH on behalf of the Tourism & Hospitality Industry to the Ministry of Finance where suggestions given by IATO for the tour operators were incorporated.
The fitment of rates of services were discussed on 19 May 2017 during the 14th GST Council meeting held at Srinagar, Jammu & Kashmir. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28%. However, it will be subject to further vetting during which the list may undergo some changes and will be given effect through gazette notifications.
Please find below a copy of the circular received from FAITH, which is self-explanatory.
This is for your information and we shall keep you update on this.
Rajiv Mehra Lally Mathews
Vice President Hony. Secretary
Dear Board Members, EC (member associations) & Cause Partner,
Over the past 24 months, all of us together have been undertaking a sustained national campaign across, to engage with the key policy makers across all States & the Central Government to sensitise them on the macro- economic importance of tourism, travel & hospitality as an industry. Parallelly many of us together, have had, multiple & iterative rounds of internal brainstorming & discussions with the GST Commissionerate & officers & leaders of the GST council to explore different options.
On 19th May, the GST council declared rates for all services. Here is a list the relevant GST rates announced along with our headline recommendations on the same. The gazette notifications & the detailing has not yet been released which will have to be analysed subsequently by respective stakeholders:
Suggested: To continue the option to discharge GST on presumptive rates & its value to be calculated on the base fare of airlines.
GST Declared: Agreed to in principle, and the GST valuation rules announced have declared that value of Service will be calculated @5% & @10% of the base fare of domestic & international airlines respectively (valuation rule 3).
Tourist cabs/ coaches:
Suggested: Since fuel has been kept out of GST, a lower GST recommended, if possible to keep closest to the current prevailing rate of 6%.
GST Declared: Agreed to in principle with a new rate of 5% GST without ITC (7 schedule).
Hotels & Restaurants:
Suggested: A lower rate of GST for hotels, restaurants & for banqueting of 12%.
GST Declared: Renting of Hotels / inns/ campsites / guest houses/ similar commercial establishments for residential / lodging has been segmented on the basis of tariffs / rates
- 0%: Declared Tariffs below ?1000 (exemption 74)
- 12% with full ITC for tariff between ?1000-?2500 (17 schedule)
- 18% with full ITC for tariff between ?2500-?5000 (24 schedule)
- 28% with full ITC for tariff above ?5000 in accommodation including 5* & above (32 schedule)
-18% with full ITC for supply of food & drinks in outdoor catering (23 schedule)
-18% with full ITC for bundled supply of foods, drinks, premises in hotels, clubs, Shamika, convention centres (25 schedule) & restaurants have been segmented as under:
- 12% with full ITC for restaurants without AC (16 schedule)
- 18% with full ITC for restaurants with a/c or central heating or serving liquor (21,22 schedule)
- 28% with full ITC for restaurants in 5 star & above hotels (31 schedule)
Suggested: Create a new category of presumptive rate or create the lowest possible GST rate similar to what was existing for goods of 5% & recommended no GST on adventure Tourism or on outbound tourism segments.
GST declared: A new category of GST rate created of 5% with no ITC (10 schedule) Additionally, tour operators selling services to foreign nationals outside of India, for travel outside of India continues to be zero rated. (exemption 36)
Foreign exchange paying tourists
Suggested: Exempt from GST
GST Declared: GST refund made available for tourists now but only on goods brought in India & being taken out.
Suggested: 12% as suggested for hotels & restaurants
GST Declared: Not clear, but point 33 of schedule of services talks about transfer of rights to use without transfer of title to attract the same GST rates as the original category.
Business Exhibition services organised out of India
Suggested: Exempt from GST
GST Declared: Exempted (exemption 27)
Next steps: This GST rules hint both at the brilliance of bureaucracy & yet are shrouded by the perils of politics.
It is commendable that on one side they have agreed to lower GST rates for one value chain of tourism i.e. travel, tours & transportation but it is extremely disappointing that for the other part i.e. hotels & restaurants a regressive GST taxation regime has been applied. A rate of 28% and the classification of hotels & restaurants as luxury is completely unacceptable and more so shocking as it is being clubbed with the lights of gaming & racing which are speculative activities and not nation building activities. The better the hotel & restaurant businesses are striving to create higher standards and get higher ratings the more punitive is the GST regime. Economic & visionary development in this industry cannot also parallely carry the tags of elitism.
We are in the process now of finalising a very strong appeal to the Finance Minister from the chairman's office highlighting how perilous this decision will be & will completely out-price Indian tourism. We will then follow it up a nationwide press release & thereafter it will be highlighted to all the chief ministers & tourism ministers. A press conference as & can earliest possible will be scheduled.
Additionally, we request you to analyse the fine print & have it interpreted in details as applicable to your business models along with your tax accountants. Please share with us points of concern or celebration as they emerge from that analysis.
Please share your thoughts under copy to your association Presidents. We will also keep you updated as this progresses...
Federation of Associations in Indian Tourism & Hospitality