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Booking a ~5,000-plus hotel room? Be ready to pay more

SHUBHAM PARASHAR they can be taxed at 18 per cent. However, they Hotels with tariffs between ~2,500 and ~5,000
Mumbai, 19 May will be raising additional revenue by levying will fall under the 18 per cent tax slab and those
surplus charges such as parking charge and with tariffs between ~1,000 and ~2,500 will be
Staying in luxury hotels with tariffs above ~5,000 room service charge. charged at 12 per cent. Ritesh Agarwal, founder
will cost you more as the service tax under the Taxpayers and customers are the ones & CEO, OYO rooms said, We welcome this step
new GST regime has been set at 28 per cent. who will bear the cost. Moreover, such a move by the government. A lower tax rate for budget
Experts consider this a regressive move, espe- is also a deterrent for hotel owners who were hotels will ensure that the industry's quality
cially at a time when occupancy levels in metros planning to expand after increase in upgrade continues while delivering
and tier-II cities are on the upswing. occupancy level in FY16; investments The real good standardised accommodation to mil-
On an average, effective tax rate on hotels in in leisure markets will be the hardest news is for lions of middle-class travellers. Hotels
Maharashtra are between 19 per cent and 20.5 hit, say experts. small hotels are the single-biggest contributor to
per cent. This subsumes nine per cent service tax The restaurants in luxury hotels will with tariffs the tourism industry, which accounts
and 10 per cent luxury tax for hotels in general also fall under the same tax slab, which below ~1,000, for 7.5 per cent of the GDP. The move
and 10.5 per cent service tax and 10 per cent lux- makes even dining out expensive. which have will boost revenue from the travel and
ury tax for hotels with banquet facilities. A dif- Consumption pattern of restaurants been exempted tourism sector, going ahead.
ference of 800-900 basis points in tax level is in luxury hotels falling under the new Sharat Dhall, COO,, said,
demoralising, said Achin Khanna, tax expert tax regime may change, customers may choose Overall this seems like a good move for the sec-
at consulting firm HVS. to stay in luxury hotels but may dine outside tor and should help the growth momentum con-
Under the new regime, hotels will fall under where they can save on their additional expens- tinue. Budget hotels for the aam aadmi have
tax slabs on tariff basis and not by category. In es that increases due to rise in tax, said Suresh been kept insulated from any increases in tariffs,
tier-II cities, hotels that do not comply to 5-star Nair, tax expert, E&Y. There is also confusion while the luxury segment might see an increase
classification also charge high tariffs. Slabs are about the tax slab of restaurants that are in due to the GST rates announced.
by rate and not star classification. Even so, hotels offering tariffs between ~2,500 and ~5,000 Amidst divergent taxes for luxury and
~5,000 does not mean luxury. Levying 28 per and also above ~5,000. budget hotels, the real good news is for
cent is unfair, Khanna said. A way for the hote- Where luxury hotels are worse affected by small hotels with tariffs below ~1,000, which
liers is to keep their tariffs below ~5,000, where the move, budget hotels have a reason to cheer. have been exempted.