Get ready to bunk up—hotel stays to get expensive with GST rollout

The government is trying to yield a lot more tax from hotels that serve liquor.

If you are used to staying in fancy hotels–thanks to your company’s HR policy–then get ready to bunk up with colleagues because room rates are going to get expensive from 1 July. The tax for room rates over Rs 2,500 is 18 percent and for anything over Rs 5,000 it is 28 percent.

According to KPMG, business travel in this country incurs spend of $30 billion and is expected to treble to $90 billion by 2030. Will this have an impact on business travel or even vacationers?

“There will be a lot of renegotiating over the next one month. But GST will see companies relooking at their travel budgets. Vacationing will not be impacted because most of India is looking for quality experiences which are budget friendly, though an affirmation to this would be the trends over the next three months,” says Narayan Menon, Co-founder of Wandertrails.

A company like Infosys spends more than Rs 300 crore on travel every year. Similarly, every company which has a large marketing and sales team would be sending droves of employees across the country. Now, thanks to GST, companies will have to provision for higher payments.

What will eventually happen is that the companies will have to renegotiate tariffs with hotels and try to bring them down to the 5 percent rate. However, it is most unlikely because most of the senior management do stay in rooms that cost Rs 5,000 or more.

Along with the room tariff, anything that you consume in the hotel, food and beverages including alcohol, will also be expensive with a 28 percent tax. Similarly, eating out in hotels is also going to incur a tax of 18 percent.

The government expects to raise at least Rs 60,000 crore in tax revenues from the hospitality industry.