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Hotel Accommodation

22 January 2020

What rate shall be charged for various other services provided by hotel such as extra bed, laundry, cab hire, doctor on call, etc ?

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4 Replies

sidhu (Tax consultant) (70 Points)
Replied 22 January 2020

Hi,

The GST rate for other allied services (such as extra bed, laundry, cab hire, doctor on call etc...) provided by hotel, along with principle supply i.e., Hotel accommodation will be the same rate of tax applicable for hotel accommodation.

The GST rates on Supply of 'hotel accommodation' per unit of accommodation per day or equivalent -

a) Having value of supply of a unit of accommodation below INR 1,000 is "Nil";

b) Having value of supply of a unit of accommodation above INR 1,000 but less than or equal to INR 7,500 is "12%"; and

c) Having value of supply of a unit of accommodation above INR 7,500 is "18%";

Thanks,

Sreedher

sukhwani keyur (588 Points)
Replied 22 January 2020

But Composite supply is applied only if the services are naturally bundled i.e. provided as package as example given by department in its clarification. These services are not naturally bundled. They are provided on guest request and are charged separately in invoice. So what should be followed in this case ?

sidhu (Tax consultant) (70 Points)
Replied 23 January 2020

Hi ,

Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below –

a) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business.

b) The elements are normally advertised as a package

c) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.

d) The different elements are not available separately.

e) The different elements are integral to one overall supply – if one or more is removed, the nature of the supply would be affected.

f) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines.

g) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service.

The above services "extra bed, laundry, cab hire, doctor on call" are basic necessities expected by customer from hotel accommodation. Hence same rate of tax as applicable on principal supply 'accommodation' is applicable.

Please go through the example: service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business.

However, hotels may on a conservative note pay 18% GST on these additional services.