How does GST apply on Hotel Business ?


Goods and Services Tax is without a doubt the most remarkable economic policy that is consistently driving the country towards the way of advancement. Clearly, the GST administration has secured a wide range of dealers and business under its domain. 

Today, different dealers who are having GST registration have seen extraordinary improvement in their business. 

The GST administration in India has played a crucial role in the hospitality sector. Regardless of whether you are running a little roadside Dhaba or a 5-star hotel; you have to duly fulfill the compliance under GST independently according to your business structure. The GST council has completely defined the structure of indirect taxation for the hoteliers and other food businesses operators. 

1. How were Taxes applicable on Hotels before GST rollout? 

Before the GST regime was started, the indirect tax system was really confusing for the hotel business operators. 
  • In different states, there were many taxes, such as the VAT, entertainment tax, and the central service tax. 
  • The high and intricate taxes gradually decreased the net revenue of the hoteliers. 
  • Moreover, earlier the hoteliers also had to deal with the lengthy official procedure because of these numerous taxes. This used to be a problem especially at the time of recording and filing various separate tax returns. 

2. How has GST facilitated in the easing of the hotel business? 

Almost certainly, the GST law has simplified the hotel business up to many degrees. 
  • A large number of separate taxes are now replaced with a single GST tax. 
  • Presently, all those hoteliers having GST registration basically take from their clients an appropriate GST rate on the Goods or services they give them. 
  • Moreover, they need not file various other tax returns and only need to do the GST return filing every month. 

3. How GST tax is applicable to hotel rentals? 

Prior, there used to be a level GST of 18% on hotel rooms. 
  • Adding to it, the government gave further help by the method for imposing GST tax on rental service depending upon the value-based esteem as opposed to the single rate. 
  • This change was presented at the 28th GST meeting on 21st July 2018. 

Here are the GST rates relevant on hotel room rents:- 

Hotel Room rent (₹) Rates of GST (%)
Up to 1,000 0
1,000 – 2,499 12
2,500 – 7,499 18
More than 7,500 28

4. How hoteliers can get the input of GST paid? 

As a matter of fact, the input tax credit can now be easily claimed by the hospitality industry in a more effective manner. 
  • Preceding the GST rollout, the input taxes, (for example, on the raw input for food, cleaning stuff, and so on.) were not effectively settled against the final tax. This has now turned out to be much simpler in the GST regime. 
  • Presently, you can essentially subtract the tax paid on inputs from your current GST liability. This input tax can be adjusted to settle the future GST tax liability. 

5. What do we need for hotel business other than GST? 

  • At this point, the importance of GST registration for a hotel business is now very obvious. 
  • Moreover, the essential prerequisites for a hospitality business are assuring nourishment and food security. 
  • And for that, you require FSSAI registration. 
  • FSSAI registration or the food license is essential at the underlying stage while starting a food business. Regardless of whether it's about food production, processing, assembling or handling, bundling or just transportation of the food items, all the food businesses require an FSSAI registration. 
The key target of getting FSSAI registration is to guarantee that protected, clean, healthy and nutritious food products are available to all the customers.

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