The goods and services tax (GST), which celebrated one year of the rollout on July 1, has been a mixed bag for the hospitality and restaurant sector, and firms are expecting further rationalisation of the tax structure.
The initial days of GST were full of confusion, according to Garish Oberoi, president, Federation of Hotel and Restaurant Associations of India (FHRAI).
“While the hospitality sector was under the impression that it will be kept under one slab, we found out that we were kept in all the slabs right from 0 to 28 per cent,” Oberoi said.
However, he said it is too soon to comment on the real impact and the sector will wait for further rationalisation of the GST mechanism.
“Overall, it has been a mixed bag and mostly not very positive for the industry,” he added.
Oberoi further claimed that the implementation of GST lead to the industry losing some international high-end meetings, incentives, conferences and events (MICE) business.
“No where in the world do you see a taxation rate at 28 per cent and once the system finally was put in place those business went to other locations,” he added.
Even for the restaurant industry, he said, while the rate reduction to 5 per cent has been positive the input credit has affected many restaurants in the metros.
Hotel and Restaurant Association of Western India (HRAWI) president Dilip Datwani said there were many grey areas which caused uncertainties but were clarified and resolved over time by the GST council.
However, the high rate of 28 per cent continues to remain a concern and is expensive for both domestic and international tourists, he added.
“Tourists prefer travelling to our neighbouring countries, including Sri Lanka, Bhutan or even Thailand because they have lower taxes,” said Datwani.
According to him, one of the major issues for the MICE segment has been the unavailability of input tax credit (ITC) benefit for the corporate sector.
Raj Rana, chief executive officer, South Asia, Radisson Hotel group, said, “For the hotel industry, we hope that the three brackets of tax currently in effect, will move to a single bracket.”
For the MICE business to compete, he said taxation is an important component and neighbouring countries’ lower taxation puts India in a disadvantageous position.
“Therefore, we hope that a rationalisation would be considered whenever GST is reevaluated,” he added.
Lords Hotels and Resorts’ associate vice-president – finance, Pradeep Jain said the biggest achievement of GST has been the elimination of the multiplicity of taxation, however, it was constantly tweaked through the year and the initial phase of implementation was more disruptive.
“The initial staggered tax rates applicable on different tariff slabs were rationalised only towards the end of the year,” he added.
The GST applicable on food and beverages at restaurants was brought down to 5 per cent during the same time, however, it came at the cost of ITC for the enterprises.
Jain said the tax filing system too was difficult to comprehend at first and there are still some areas that could be ironed out.