Quick Summary
The Ministry of Finance has reiterated through a fresh set of FAQs that hotels charging up to Rs 7,500 per room per day will be taxed at a mandatory 5% GST rate without ITC. The clarification settles industry queries on whether hotels could voluntarily opt for the 18% GST slab with ITC for such unit
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FAQ :
Hotels charging up to Rs 7,500 per room per day must charge a mandatory 5% GST.
No, the Finance Ministry has clarified that hotels charging up to Rs 7,500 per room per day cannot opt for the 18% GST slab with ITC; they must charge 5% GST without ITC.
'Without ITC' means hotels cannot claim credit for the GST paid on their business expenses, which increases their overall operational costs.
The hospitality sector, especially mid-scale and budget hotels, is concerned that the removal of ITC will increase operating costs, reduce profit margins, and discourage new investments.
Industry associations like the Hotel Association of India (HAI) and FAITH have raised concerns and are seeking discussions with the government to allow ITC on the 5% slab for tariffs up to Rs 7,500.
The government maintains that the simplified 5% GST slab for rooms up to Rs 7,500 is intended to promote greater uniformity and affordability for consumers.
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