The Goods and Services Tax (GST) is a comprehensive tax levied on the supply of goods and services in India. It is levied at every stage of the supply chain, right from the manufacturer to the final consumer. The GST Council, on 18th May 2017, revised the GST rates for various sectors, including the hospitality industry. The new rates have impacted hotel bookings in India in many ways.
Earlier, the GST rate for hotel rooms was based on room tariffs. For instance, rooms costing up to Rs. 1,000 per night were charged 0% GST, while the rate for rooms costing Rs. 7,500 or more a night was 28%. This led to confusion and disputes over the classification of hotel rooms and tariffs. The new GST rates simplify the system by creating a four-tiered system of 5%, 12%, 18%, and 28%.
Hotels with tariffs up to Rs 1,000 and those with tariffs between Rs 1,001-2,500 now attract a 5% GST rate. This has made budget hotels cheaper for consumers and given a boost to the domestic tourism industry. Hotels with tariffs of Rs 2,501-7,500 now attract a GST rate of 12%, while those with tariffs above Rs 7,500 attract a GST rate of 18%. This has led to a slight increase in the cost of luxury hotels and resorts.
The new GST rates also impact the online hotel booking industry. Online travel agencies (OTAs) such as MakeMyTrip, Booking.com, and Goibibo were earlier charged a GST rate of 18% on the commission they charged hotels for room bookings. However, under the new system, the GST rate on hotel bookings made through OTAs has been reduced to 5%.
This has led to a surge in online hotel bookings, as they are now more affordable for consumers. OTAs have also launched promotions and discounts to attract customers, which is benefitting both hotels and consumers. The lower GST rates have also made it easier for hotels to work with multiple OTAs without worrying about higher commission rates.
Furthermore, the new GST rates have made the hospitality industry more competitive. Hotels and resorts have been forced to revise their prices to stay competitive in the market. This has led to price wars and promotional offers, which is good news for consumers.
In conclusion, the new GST rates have had a significant impact on hotel bookings in India. The four-tiered system has made the GST rates more transparent and simplified the process. The rates have made budget hotels more affordable and led to an increase in online hotel bookings. The lower GST rates on the commission charged by OTAs have also led to more competition in the industry. While luxury hotels have become slightly more expensive, the overall impact has been positive for the hospitality industry and consumers.
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