It's a double celebration for the hotel industry after the government reduced corporate tax rate and thereafter provided relief in GST rate on hotel tariffs.
Post the development, stocks from the space rallied by 4-15% in intra-day trade on Monday. Gainers from the segment are stocks such as Chalet Hotels, Hotel Leela, Indian Hotels, Lemon Tree, Kamat Hotels, EIH, Mahindra Holidays, Oriental Hotels, Royal Orchid and Taj GVK Hotels.
To boost Make In India and private investments, government in a surprise doled out a massive relief package by reducing effective corporate tax rate to 25.17% that includes cess and surcharge from the earlier more than 35% from FY20. Also, on the sidelines it slashed MAT from 18.5% to 15%. All such measures have been possible through the recent RBI's dividend released to the government.
At the same time to provide a fillip to the tourism sector, GST rate revision to 18% in case of room tariffs over Rs. 7500 per day, 12% on room tariffs charging below Rs. 7500 per day and waiving off GST on rooms chargeable below Rs. 1000 on a daily basis, will also boost up operations.
As per a brokerage firm, from the corporate tax rate cut move, EIH and Taj GVK is expected to gain the most. Also, other players in the industry such as Bengaluru based Wonderla Holidays will see lower tax outgo going forward.