Declared Tariff for GST foxes hotels


Shortage of transparency around a critical term for determining the GST rates for hotels; is a spelling problem for consumers booking hotels in the top tourist season. The government has already announced that the hotels with ‘declared tariffs’ of Rs 7,500 & above will charge 28% GST. But, the hoteliers stated that, the term ‘declared tariff” is doubtful and unclear; as hotels could report and publish new seasonal tariffs several times a year and thus; hotel rates may vary significantly with each season.

Declared Tariff for GST foxes hotels


Thus, the customers & travelers could misunderstand the term, and this is creating confusion among them. A customer told that he was trying to book a room at Ibis Mumbai airport, and they charged him 28% tax for a tariff of Rs 5,999.

Accor, which possesses brands such as Ibis & Pullman, did not reply to an email seeking comments. Some hotel chain executives stated that the rates; submitted to the government were in surplus of Rs 7,500. However, those being allowed now; are the best available rates which could fluctuate with the season.

Hilton affirmed on its website that all the prices disclosed on its website were subject to GST and the tax amount; based on the current declared tariff of the room type; will be summed to the hotel bill.

Hotels & lodges with a tariff below Rs 1,000 per day were exempted from GST. On the other hand, those with a room rate of Rs 1,000-2,500 were taxed at 12%, those with a tariff of Rs 2,500-7,500 will draw 18% tax & those above Rs 7,500 will be taxed at 28%. Earlier, the threshold for the 28% slab was at room tariffs of Rs 5,000, but later; GST Council changed it to Rs 7,500.

Hotel associations such as the Federation of Hotel & Restaurant Associations of India (FHRAI) are now requesting the finance ministry for taxes to be charged on the invoice value.

Garish Oberoi, the president of FHRAI said that the confusion began when the government created all these slabs. Either the government should do away with slabs & keep a uniform tax rate or hotels should charge tax on the invoice value. Further, he said that everywhere else people are paying tax on the invoice value.

In July, the ministry interpreted that the accommodation in any hotel, including five-stars; possessing a declared tariff of a unit of accommodation of less than Rs 7,500 per unit per day will attract a GST rate of 18%. Further, the ministry stated that the star rating of hotels is irrelevant for determining the applicable rate of GST. But hoteliers have been asking the ministry to charge taxes on the transaction or invoice value rather of the declared tariffs.

Tax experts reckon the government should present clarity and should grant the invoice value for determining the GST rate in hotels.

Pratik Jain, national leader, indirect tax at PwC India said, “Levying the tax on the basis of declared tariff leads to complications. If I am giving a room on a particular day which is less than Rs 7,500 then; ideally it should be taxed at 18%. There could be issues relating to seasonality and having different declared tariffs for a certain class like corporate customers.”

He further added that the government should clarify the process. They should not connect it with the tariffs. As in other cases, it should be based on the invoice & the actual rate on a particular day. If the rate is less than Rs 7,500, they should not charge consumers 28%.


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