the goan I network
Panaji
The announcement of four-slabs of tax for services under the upcoming GST regime has sent shock waves across the tourism industry in Goa.
Sources have revealed that the proposed tax rate is so high for certain categories that a representation is likely to me made to the Chief Minister Manohar Parrikar, and also to the GST Council.
nicde, Lucida Grande, Arial, Helvetica, sans-serif">5-star hotels are the most worried of the lot. This is because a tax rate of 28 per cent has been announced for rooms and restaurants in 5-star hotels. The Goan Everyday spoke to industry representatives, who said that the 28 per cent GST rate is much higher than their present tax liability.
A chartered accountant explained, “As of now, 5-star hotels are paying 9 per cent services tax on room rent. Then, there are different slabs of luxury tax. The peak luxury tax rate is 12 per cent in Goa. Put together, the maximum tax rate applicable on room rent in 5-star hotels is 21 per cent.”
He continued, “On restaurants in 5-star hotels, there is 6 per cent service tax and 12.5 per cent value-added-tax (VAT) on soft beverages and food. This means that the total tax on restaurants in 5-star hotels stands at approximately 18.5 per cent.”
This clearly establishes that the GST rate of 28 per cent for 5-star hotels is much higher than the 21 per cent peak tax rate on room rent and 18.5 per cent tax rate on restaurants.
Shivam Verma, general manager, Royal Orchid Beach Resort & Spa at Utorda, said, “Right now, we are paying 21 per cent tax on room rent. If it increases to 28 per cent as announced under GST, we will be paying 7 per cent more tax on room rent as part of the business.”
He continued, “This will have to be passed on to the tourists, and therefore this move is really discouraging for the tourism business. It will make it very difficult for tourism in Goa to compete with other destinations like Sri Lanka and Thailand.”
Savio Messias, president, Travel and Tourism Association of Goa (TTAG), said, “Many 5-star hotels have already signed contracts to bring foreign tourists in the coming season. These contracts are inclusive of tax. Now that the GST has increased the tax, the question is “ will these hotels be forced to bear the additional tax?”
Over the years, 5-star hotels have shown a lot of interest in Goa. Brands like Hyatt and Taj have several properties in the state. Besides, a number of new 5-star hotels are being planned in the state as well.
Now that GST will increase the tax burden on 5-star hotels, it remains to be seen whether they will show as much interest in Goa as before. But, it seems that hotels might just be able to bring down their tax under GST from 28 per cent. Another chartered accountant said, “GST works on the principle of input-tax credit. This means that the hotels will be able to take credit amounting to the tax already paid on their inputs from their overall tax liability. This may help them in bringing down their tax obligation.”
Only time will tell whether or not hotels will be able to utilise input-tax credit. Until then, 5-star hotels will remain anxious as to how to deal with the sudden jump in their tax liability.
TAXING TIMES
Proposed GST rate of 28% is much higher than the present tax rate for 5-star hotels
This means 7% rise in tax for 5-star hotels as the maximum tax on room rent in 5-star hotels is 21% at present
Many 5-star hotels have already signed deals, inclusive of tax, to bring tourists in the next season; new GST rate will inflate tax liability
Hoteliers fear that it will make it difficult for Goa to compete with Sri Lanka, Thailand and other destinations
PRESENT TAX STRUCTURE
5-star hotels pay 9% services tax on room rent
Peak luxury tax rate is 12% in Goa
Put together, maximum tax rate applicable on room rent is 21%
