Travel industry seeks uniform 12% GST rate to boost Indian tourism

The travel and tourism industry has urged the government to adopt a uniform 12% GST rate on hotels in the upcoming 2024-2025 Budget. The change is aimed at boosting domestic and inbound tourism.

Currently, hotel room rents are subject to different GST rates, leading to inconsistency in prices. For example, a room costing Rs 10,000 per night falls under the 18% GST rate, while a room priced at Rs 7,000 in the off-season falls under the 12% GST rate. Rajesh Magow, co-founder and CEO of MakeMyTrip, highlighted that a uniform 12% GST rate will make compliance easier for hotels. Additionally, he pointed out the disparity that customers pay 5% GST for non-AC bus bookings through e-commerce platforms, but pay zero GST when booking directly with bus operators.

Mago also suggested tax incentives for hotels and homestays that adopt sustainable practices, supporting India's commitment to the Sustainable Development Goals (SDGs), particularly SDG 11 (Sustainable Cities and Communities) and SDG 13 (Climate Action). These incentives can promote eco-friendly measures such as energy-efficient lighting, water-saving appliances and waste-reducing practices in the tourism sector. Pradeep Shetty, President, Hotel and Restaurant Association (Western India), stressed that tourism and hospitality, which contributes nearly 10% to India's GDP, should be declared a priority sector. He proposed granting infrastructure status to hotels and convention centres with a project cost of Rs 10 crore and above to attract investments and accelerate development.

Shetty also said that India's current GST rates for hospitality are among the highest globally, making tourism expensive. He urged the government to merge the 18% GST category for hotel room rates above Rs 7,500 per night into the 12% category to boost tourism.

Madhavan Menon, Executive Chairman, Thomas Cook (India) Ltd, recommended exemption from Section 53 of GST for travel agents, saying it would not lead to revenue loss as airlines already pay tax on their sales. Menon also suggested reducing the tax collected at source (TCS) for overseas travel packages to 1% or standardising it at 5%.

By implementing these changes, the industry believes the government can significantly boost tourism, making it more affordable and attractive to both domestic and international travellers.