After liquor ban on highways, GST hits MICE hospitality hard

Almost a month into the Goods and Services Tax (GST), hoteliers complained that they have been "hit hard" in the hospitality industry's money-spinner meetings, incentives, conferences & exhibitions (MICE) segment, following close on the heels of the ban on liquor near highways.

There have been huge cancellations or postponements of pre-booked events on account of an anomaly in GST -- that MICE activities held in hotels outside of home state would not be eligible for Input Tax Credit (ITC), said a top official of Hotel & Restaurant Association of India (HRAWI).

"There is an overall reduction in MICE bookings in hotels across India as compared to the same period last year, advance bookings are being cancelled and new bookings are not happening," rued HRAWI Preisdent Dilip Datwani.

Coming back-to-back after the recent liquor ban on highways, GST has acted as a double-whammy to the industry already suffering reduced revenues and Datwani apprehends many establishments may be compelled to scale down operations or shut down, with wide ramifications.

In view of MICE Tourism as an important and fastest-growing segments of the hospitality industry, Datwani urged the government to tackle this particular aspect of GST which has a potential to disrupt growth.

For instance, the upcoming winter wedding season, one of the top grossers for the banquets division of any hotel, is predicted to be flat this year, corporate are holding events in the same state where they are registered under GST, hitting the hoteliers.

"Businesses may still have digested the high GST but without ITC it just becomes unviable. MICE Tourism is too important a segment for the country to overlook," Datwani pointed out.

On the new slabs for the hotel industry, he said the 28 per cent GST for rooms with tariff of Rs 7,500 and above is one of the highest in the world and will seriously restrict cash flows.

Besides, the tax percentage will be determined based on the published or declared rate which is creating lot of hardships for the industry.

"We have appealed to the government to remove this condition and determine the tax percentage based on the actual transaction value and review the ITC clause for inter-state accommodations," Datwani said.

Former president of HRAWI and Federation of Hotels & Restaurants Associations of India (FHRAI) Kamlesh Barot said in view of the ITC clause, corporates will arrange their MICE in the same state where they are GST-registered or take their businesses abroad with lower tariffs/taxes.

"We are in touch with the Tourism Ministry and hope the clause will be altered to encompass MICE for ITC and provide relief to the industry," Barot said optimistically

With the late industrialist JRD Tata as one of its original founders in 1950, the 67-year old HRAWI members include all major hotels from budget to deluxe and five star categories in entire western India.