Before this, rooms charging less than Rs 1,000 did not attract any tax

The GST Council in its 47th meeting is learnt to have decided to withdraw the tax exemption granted to hotel rooms that charge less than Rs 1,000 a day. Instead, such rooms are said to now fall under the 12 percent tax slab. The move has come at a time when the industry is on its way to recovery. 

Reacting to the decision, Mehul Sharma, Founder & CEO, Signum Hotels & Resorts said, 'I don’t see the 12 percent tax to be levied on hotel rooms costing less than Rs 1,000 a day impacting the current trends in travel. After a long hiatus due to Covid, it is now more essential for companies to conduct business across the country and for this, the people or company executives will travel. Business travel will only boom in the times to come and so I do not foresee this decision impacting the current upbeat travel demand."

On the contrary, Rishi Puri, Senior Vice President Operations & Development, Lords Hotels & Resorts, said, "In spite of India being a global tourism hotspot and because of its large population, it is an emerging market for business and domestic tourism. To us, the decision to levy GST on rooms priced below Rs 1,000 a day does not seem like the best. Other Asian countries have very low tax rates for their hospitality sector, which is an important reason for them ranking high on tourist wish lists. This tax is invariably going to be a burden on prospective guests who come from middle-class business communities, and people visiting leisure and pilgrimage destinations, who are looking out for accommodation at affordable rates. This, in turn, is going to affect our mid-segment hotel business too. For these clienteles, these GSTs are just extra spends."

On the other hand, the GST Council also decided that the service provided by Indian Tour operator to a foreign resident for a tour partially in India and partially outside India is to be subject to tax proportionate to the tour conducted in India for such foreign tourist subject to conditions that this concession does not exceed half of tour duration, which is a relief. 

During the meeting, it was also decided that there would be no GST for the ferry service hired for transport of passengers including tourists used as public transport from point to point transport including in Andaman & Nicobar Islands.

The two issues were recommended several times by the Indian Association of Tour Operators (IATO) and post the meeting, the industry body expressed its thanks to the Finance Minister, GST Council and Chairman of CBIC for considering the issue.