GST India: Impact on Hotel / Restaurant Sector:

The hospitality and restaurant industry in plagued by multiple taxes (Service tax, VAT and luxury tax) in the current indirect tax regime. For hotels with room tariff in excess of Rs 1,000 and above, service tax is applicable at 60% of room tariff (8.7%) in addition to VAT (ranging between 12 to 14.5%) and luxury tax wherever applicable. In case of restaurants on the F&B bills, service tax is applicable on 40% of the bill or effective rate of 5.8% apart from VAT @ 12 to 14.5%. In case of social functions (marriage, seminars etc.) the applicable service tax rate after 30% abatement is 10.15%. As input credit from central taxes cannot be set-off against VAT liability and vice-versa, this leads to cascading effect.

Under GST, the single largest advantage would be uniformity of tax rates and applicability of single rate, better utilization of input credit and benefits to end user in terms of lower prices. India would be able to attract more tourists in comparison to neighboring countries and lead to enhanced revenues to the government. However the standard rate of GST @ 18% would be higher than prevailing rates and as a resultant might lead to a black economy without bills.

With growth in the organized food services industry (Mc Donald, KFC, Pizza delivery) and new age food booking and delivery startups (Swiggy, Tinyowl, Foodpanda, Zomato and the like) the market is worth 2.5 Lakh crore and would contribute significantly to the revenues of the country. 

(Views expressed are strictly personal)