India Hotels Doomed By Huge Tax Hike?

The hospitality industry in India is perturbed and irked by a 28 percent tax to be imposed under the Good and Services Tax (GST) on hotels, where the tariff is above Rs 5,000.

This will hurt the inbound tourism market and make operations of hotels even more difficult, said Rajendera Kumar, Director of the Ambassador Vivanta New Delhi, who formerly headed the Federation of Hotel & Restaurant Associations of India (FHRAI).

Kumar said that already the liquor issue, food portions, and demonetization are having a negative impact on in-bound tourism. All hopes and promises of a lower tax have been dashed, he said.

Similar views were expressed by many other leaders, who, like Kumar, said that tourists would go to neighboring countries, where taxes are lower.

The GST on hotels where the tariff is lower will have to pay less tax, and this will help increase jobs, said Ritesh Agarwal, who heads OYO, a grouping of hotels with less tariff.

The general feeling was that the GST Council, which met in Srinager, would settle for a maximum of 18 percent tax on hotels – still a hefty increase. Not surprising then that the 28 percent hike came as a complete shock.

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