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Hotel Industry Under Goods & Services Tax - Availability
Hotel Industry Under Goods & Services Tax - Availability
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Goods and Services Tax (https://carajput.com/learn/category/gst.html) Applicability of GST on Hotels Industry - GST
Rate, ITC & GST Return
Under GST, all tax invoices raised contain an HSN Code or SAC code for the respective
goods or services supplied. Hotels and restaurants would have to use SAC Code.
1. If the invoice is given within 30 days from the date of supply of service:
Whichever is early.
2. If the invoice is not released within 30 days from the date of supply of service:
(a) it is in possession of a tax invoice or debit note issued by a supplier registered under
this Act.
(b) they have earned goods or services, or both. However if the goods on the invoice are
obtained in lots or instalments, the registered person shall be entitled to take credit upon
receipt of the last lot or instalment:
(c) the tax charged in respect of such supplies has actually been paid to the
Government, either in cash or by the use of a qualified input tax credit;
(d) required for the GST return filing pursuant to section 39:
Input tax credit (ITC) is permitted for all inputs used for taxable supplies, i.e. inputs for
the supply of goods or services for which GST has been paid. The input tax credit shall
not, however, be allowed for the supply of goods or services by outdoor catering and
restaurant services where tax has been paid at a rate of 5%. (Notification No. 46/2017-
Central Tax (Rate) of 15.11.2017)
Here are some inputs that will be considered blocked credit, and no Input Tax Credit will
be allowed:
No Input Tax Credit available on Liquor – Liquor is usually offered by hotels and their
main services either by restaurants operated by hotels or as part of room service or
otherwise. Since alcohol is clearly held out of the scope of GST, it has been treated as a
non-GST object and no input tax credit can be used for that reason. Hotels offering
services like alcohol may therefore be needed to issue a separate invoice for liquor and
a separate invoice for many other services.
As per Section 17(5)(c) of the Central Goods and services tax act 2017, Works contract
services for the development of immovable property (other than plant and machinery)
except for where it is an input service for the further supply of work contract services,
the input tax credit shall not be eligible.
In order no the CESTAT Mumbai. A/85880/2018, dated 3 April 2018, in the case of
Lemon Tree Hotels Ltd versus CESTAT Aurangabad, held that ITC is eligible for a hotel
infrastructure used for the rental of hotel services. The overall hotel infrastructure is
carried out inside the common hotel building and the construction service received in
connection with the construction of any section of the hotel is a common service that is
connected to the total hotel business. Consequently, while some aspect of the hotel
company is not taxable, it cannot be assumed that the construction service was used
solely for non-taxable services.
Email (mailto:singh@carajput.com) Call (tel:+919555555480)
GST RATES APPLICABLE ON GOODS AND/OR SERVICES PROVIDED
ON HOTELS
The GST rate applicable for hotels, inns, guest houses, clubs, campsites or other places
for temporary stay would depend on the type of facility, star rating and room rent per day
charged. GST Rates Applicable on Goods and/or Services provided
*Specified premises means premises offering hotel accommodation facilities that have
declared a tariff (i.e. a published tariff without any discount) for any unit of
accommodation over Rs. 7,500/-
Bundled service
18% GST rate is applicable on bundled service by way of supply of food or any other
article of human consumption or any drink, in a premises (including hotel, convention
Email (mailto:singh@carajput.com)
centre, club, pandal, shamiana Call
or any other place, specially (tel:+919555555480)
arranged for organizing a
function) together with renting of such premises.
The rate for amusement park
For entertainment events and amusement facilities – a GST rate of 18 % will be
applicable.
What will be the rate – In case of the hotel provide a discount on tariff
value
The GST rates applicable on all accommodation establishments (hotels, inns, guest
houses, clubs, campsites or other commercial places meant for residential or lodging
purposes) depends on the declared tariff per unit per day by the respective
establishment. If a discount is provided, then the slab of GST rate applicable will remain
the same, however, the rate would be charged on the actual tariff charged.
The beauty of the method is that the specifics of one monthly return – GSTR-1 – must
be entered manually. The other two returns – GSTR 2 & 3 will be auto-populated by the
GSTR-1 details filed by you and your vendors.
There are different returns required for special cases such as composition dealers to be
filed
GSTR-1
Period Dates
GSTR-3B return will have to be filed by all taxpayers in addition to GSTR-1, GSTR-2 and
GSTR-3 return. Earlier, GSTR-3B returns were to be filed for the month of July to
December 2020.
Late fees for GSTR-3B of July, Aug. and Sept waived. Any late fees paid for these
months will be credited back in electronic cash ledger under Tax and can be utilized to
make GST payments.
Composition scheme
Restaurants whose turnover is up to Rs. 100 lakhs per year are eligible to be registered
under the GST composition scheme (https://carajput.com/gst/gst-consultancy.php),
Restaurants registered under the GST composition scheme will have to pay GST at the
rate of 5% of aggregate turnover.
Administrative easing: GST would remove a variety of other taxes, leading to a decrease
in procedural measures and a greater chance of streamlining the tax process.
The clarity for the Consumer: It was often difficult to distinguish between a Value Added
Tax and an Entertainment Tax for a common man. However, under the GST regime,
consumers will only see a single fee on their bill and will be given a clear picture of the
tax they are paying.
Improved service performance: How many times did you have to wait in the hotel lobby
to inquire if you'd miss your flight back home because your bill was still being prepared?
With only one tax to be paid, the check-out process at hotels and restaurants is now
going to be smoother – another benefit that the hotel industry can boast about.
Input Tax Availability: The tourism and hospitality industry will find it easier to assert
and use input tax credits (ITCs) and will get the full ITC on their inputs.
2. Effect of the hotels taken over by the Government on the creation of isolation
centres:
Many states like Madhya Pradesh, Rajasthan, etc have ordered the conversion of a few
hotels and resorts as isolation centres. This is achieved in compliance with the Disaster
Management Act. Hotels give health staff a free stay. Some hotels have done this as
part of Corporate Social Responsibility. In all these cases, no consideration has been
paid. In the opinion of the author, the said transaction does not come under Schedule I
and there is no liability under GST.
Other Compliance:
ITC must be reversed (along with the required interest) in cases where payment is
not made within 180 days of the date of invoice. The ITC may be re-available for
payment to the vendor/s.
Self-invoice to be imposed on the reverse charge liability for transactions where
the supplier is not registered.
The input tax credit must be reversed for the credit notes issued by the vendors
when the credit note is issued with the GST.
Anti-profit enforcement, as the GST rate is decreased during the fiscal year 2019-
20.
The luxury tax shall be removed after the introduction of the GST. If some other tax
has been paid, it is recommended that such tax be refunded.
Dividing the total bills for lodging, food and drinks, etc will help the consumer
decide on a qualified ITC. There is no limitation on the use of ITC by the customer
if the accommodation facility is connected to the company and not to the holiday
of the customer's employees.
Q1-Will GST be charged on actual tariff or declared tariff for accommodation services?
A1-Declared or published tariff is relevant only for the determination of the tax rate slab.
GST will be payable on the actual amount charged (transaction value).
Q2-What will be GST rate if the cost goes up (more than declared tariff) owing to
additional bed?
A2-GST rate would be determined according to the declared tariff for the room, and GST
at the rate so determined
Email would be levied on the entire
(mailto:singh@carajput.com) amount
Call charged from the
(tel:+919555555480)
customer. For example, if the declared tariff is Rs. 7000 per unit per day but the amount
charged from the customer on account of extra bed is Rs. 8000, GST shall be charged at
18% on Rs. 8000.
A3-Tariff declared anywhere, say on the websites through which business is being
procured or printed on tariff card or displayed at the reception will be the declared tariff.
In case different tariff is declared at different places, the highest of such declared tariffs
shall be the declared tariff for the purpose of levy of GST
Q4-Same room may have different tariff at different times depending on the season or
flow of tourists as per dynamic pricing. Which rate to be used then?
A4-. In case different tariff is declared for different seasons or periods of the year, the
tariff declared for the season in which the service of accommodation is provided shall
apply
Q5-If tariff changes between booking and actual usage, which rate will be used?
Q6-. GST at what rate would be levied if an upgrade is provided to the customer at a
lower rate?
A6-If declared tariff of the accommodation provided by way of the upgrade is Rs 10000,
but the amount charged is Rs 7000, then GST would be levied @ 28% on Rs 7000/-.
Concluding comments
GST has both negative and positive effects on the hotel industry. With the advancement
of GST, hotels are in a position to enjoy the benefits of lower tax rates. Although the
constraint of ITC availability remains a serious issue. GST eliminated many taxes,
leading to a reduction in the system for procedural enforcement and thereby to a
streamlining of the tax system. GST is a strong initiative for the tourism and travel
industries. A decreased tax rate and a single tax system will undoubtedly inspire more
tourists and lead to growth in the same area. However, there is still a great deal of
potential for this sector to succeed at national and international level. From the front, the
hotel sector is leading the hospitality industry. The Government Of India is innovating
things from scratch so that positive results for the hospitality sector can be achieved
and also bearing in view that every business person associated with this industry must
be fully familiar with new GST regimes and adopt the same trends for the proper
implementation of national plans.
Rajput Jain & Associates have been in the industry of business service providers
for over five decades. We have been able to propel the growth through the modern
age of technology incorporating highest ethical and professional values. From
registration of companies to solving complex business issues we have improved
our expertise over the decades. The guidance of our leaders has helped to guide
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Published On: Nov 09, 2021 | By: RJA
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