Only 16% of Consumers See Full Benefit of GST Rate Cut on Mid-Scale Hotels
A survey indicates that despite the government’s reduction of the Goods and Services Tax (GST) rate on mid-scale hotel accommodation, only a small fraction of consumers have experienced the full price benefit.
Key Finding on Benefit Transmission
- Low Consumer Benefit: The survey found that a stark minority—only 16% of consumers—reported receiving the full benefit of the GST rate cut on hotel accommodation, specifically for mid-scale properties.
Reasons for the Discrepancy
- Tax Cut: The GST rate on hotel rooms priced at or below ₹7,500 per night was lowered from 12% to 5%.
- The ITC Denial: The primary barrier preventing hotels from passing on the full benefit is the denial of Input Tax Credit (ITC) on their operational costs (construction, repairs, and supplies) under the revised 5% rate structure.
- Cost Absorption: Because hotels cannot claim back the GST they pay on inputs, that cost becomes embedded in the operational expenses. This embedded cost is then factored back into the final room tariff, substantially offsetting the intended price reduction for the consumer.
- FHRAI Concern: The finding aligns with the hospitality industry’s concerns (raised by the FHRAI) that the “GST without ITC” structure hinders affordability and prevents the tax rationalization from achieving its goal of boosting tourism competitiveness.
Source :- CNBC TV18