Tourism Industry Seeks Uniform 12% GST Rate for Hotels in Next Budget

The travel and tourism sector has requested the government to implement a uniform 12 per cent GST rate on hotels in the upcoming 2024-2025 Budget. This move aims to enhance both domestic and inbound tourism. The current tiered GST system, based on hotel room tariffs, can cause price inconsistencies as hotels adjust rates according to demand and peak seasons.

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Rajesh Magow, co-founder and Group CEO of MakeMyTrip, highlighted the need for a uniform GST rate to simplify compliance processes. He stated, "We urge the finance minister to consider a uniform GST rate of 12 per cent on hotels in Union Budget FY25." Magow also pointed out the disparities between e-commerce operators and suppliers in the domestic market. For instance, a customer pays 5 per cent GST when booking a non-AC bus through an e-commerce platform, whereas direct bookings from bus operators incur no GST charge.

Tax Incentives for Sustainable Practices

Magow further suggested that tax incentives for hotels and homestays adopting sustainable practices would align with India's commitment to the United Nations Sustainable Development Goals (SDGs). He said, "By offering tax incentives that promote eco-friendly measures in the tourism sector, such as energy-efficient lighting, water-saving devices, and waste-reduction practices, the finance minister will be encouraging the industry to contribute to these global goals."

Pradeep Shetty, President of the Hotel And Restaurant Association Western India, emphasised that tourism and hospitality contribute around 10 per cent of India's GDP. He believes this sector should be declared a priority. Shetty mentioned that granting infrastructure status to hotels and convention centres with project costs of Rs 10 crore and above is crucial for attracting investments and accelerating growth.

Infrastructure Status and GST Rates

Shetty also noted that current GST rates for hospitality are among the highest globally, making tourism expensive. He urged the government to abolish the 18 per cent GST category for hotels with room rates above Rs 7,500 per night and merge it with the 12 per cent category. "This will boost both domestic and inbound tourism," he added.

Additionally, Shetty stressed the importance of ease of doing business. He proposed a national e-single window clearance system for hotels and restaurants through the Hospitality Development Promotion Board. This system could significantly reduce costs and improve competitiveness in the sector.

Madhavan Menon, Executive Chairman of Thomas Cook India Limited, SOTC, Sterling Holidays, and TCI, recommended exempting Section 53 of GST for travel agents. He argued that this exemption would not result in revenue loss for the government since airlines already discharge tax on their sales. Menon also suggested lowering Tax Collected at Source (TCS) to 1 per cent or standardising it at 5 per cent on foreign travel packages.

The travel industry is pushing for these changes to make India a more attractive destination for tourists while ensuring sustainable growth. By addressing these issues in the upcoming budget, the government can support the sector's development and contribute to global sustainability goals.