New GST slabs will cripple small lodges: Hotel associations

NT Correspondent
Bengaluru

Hotel owners expressed displeasure at the Goods and Services Tax (GST) council recommending 12 per cent GST on rented rooms costing under Rs 1,000 per day. Earlier, there were no taxes on hotel accommodation costing under Rs 1,000 per day.

However, those costing Rs 2,000 and above were taxed 12 per cent GST. Bruhat Bengaluru Hotels Association (BBHA) P.C. Rao said that his organisation had written to the Finance Minister Nirmala Sitharaman, requesting her to overturn the proposal.

“Who will go for a Rs 300, Rs 500 room? A person with modest necessities will be affected. Such people may avoid hotel stays now. Small hotel businesses might collapse,” he said.

BBHA describes itself as an association of hotels, restaurants, bakeries, sweet shops and ice-cream parlours. Mysuru Hotel Owners Association president Narayana Gowda said that if the government insisted on taxing cheap lodges, they should at least consider bringing it down to a lower slab.

“This would cause a bit of trouble, especially for lower and middle class people. It would be of some relief if the government brought it down from 12 per cent to five per cent,” he said, adding that his organisation would soon write to the government requesting a rollback of the decision. Rao said that taxing small businesses was not fair or productive.

“There are a lot of hotels that charge Rs 200, Rs 300, Rs 500 rent (per day), particularly in villages and even temples that rent out rooms on their premises. Collecting 12 per cent from them is very difficult because they are very small businessmen. Some people who change jobs might stay in such hotels until they can get a house on rent. They are transit hotels in a way. It is affecting the common man,” Rao said.

“For small hotels, accounting is also an issue. Monthly returns and monthly accounting are small. Government should not have thought of taxing them,” he added.

Hospitality jobs may be hit

He said that this proposal went against the Centre’s emphasis on encouraging entrepreneurs and creating jobs. “Government said you can become an entrepreneur and create employment. These are small-time entrepreneurs. Wherever it is possible, they may set up hotels in villages etc to give jobs to people of lower classes.”

“For example, if someone invests Rs 1 crore in a hotel business, they’ll create jobs for minimum 60 people. If someone invests the same amount of money in any other sector, they may create 20 jobs only. Our industry creates thrice as many jobs for the same investment. We create jobs for locals and people without a formal education and deprived people. Such people should not be affected. This is happening at a time when the collection of the GST is good. Why would they want to do this now? This is a headache for both customers and businesses,” Rao said.

The BBHA president added that temple tourism would also take a hit due to the decision.