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Small hotel owners in Kerala have raised their concern over the move to fix a five per cent GST slab for budget hotels in the state.
Submitting a representation to the state government through FICCI, the budget hotel sector felt that any substantial increase in the taxes will leave these hotels no choice but to pass on the burden to the end-customer. FICCI, therefore, requested that hotel accommodation of less than ₹2,000 per night room tariff should be put under the five per cent GST rate structure.
According to FICCI, budget category hotels which earn less than ₹2,000 per room night comprise 80 per cent of the market and these are the preferred option for the common man, primarily since they are the only ones within their means and reach.
The hotel industry, since 2012, has enjoyed an exemption in service tax if the room tariff is less than ₹1,000 and this has remained unchanged despite the price rise due to inflation. There is also an added component of luxury tax in Kerala.
A low tax rate on budget hotels is equally important even in the GST regime to ensure that the cost burden is not passed on to the lower and middle strata of society, which are the biggest customers for these budget hotels.
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