GST: Fresh rate cards await customers at hotels across the country starting July 1

While luxury hotels and its customers will remain unaffected, your next door eatery is likely to make you feel the pinch

Come July 1 and fresh, revised rate cards will be presented to customers at most mid-level, A/C and non A/C restaurants across the country. With hotels and restaurants all set to implement GST with uncertainty still looming large, customers will have shell out more at mid-level hotels.

Luxury hotels will remain unaffected but your regular next door eatery will be forced to pass on its burden to you. GST is giving hoteliers the jitters as much as for the common man. At 28 percent tax slab luxury hotels will remain unaffected and so will small hotels that fall under the 5 percent tax slab with less than Rs 75 lakh turnover. With 12 and 18 percent tax slabs the popular neighbourhood darshinis, dhabas, coffee shops and food joints will get dearer.

What you are likely to pay

Despite being categorised under four different slabs, hotels have the discretion to decide rates of food items. While small hotels that fall under the 5 percent slab may not affect any change in prices. Non AC hotels under the 12 percent slab currently pay 4 percent tax in Bengaluru but from July 1, they are expected to pay 12 percent. Every dish you order from a non A/C restaurant will cost you 6 to 8 percent more. While the restaurants will pay their regular 4 percent in tax, the difference amount will be passed on to the customer.

"Hotels and restaurants in Bengaluru currently pay a tax of 4 percent from declared turnover. With GST, customers will have to bear the burden. Every component has to be shown in individual bills and hence has to be collected. There is no choice," said Subramanium Holla, Secretary of Bruhat Bengaluru Hotel Association.

In mid-level A/C restaurants, customers will now have to pay 12 to 16 percent extra on each order. Incidentally, if you walk into a star hotel's restaurant, you will have to pay less, at least 4 percent less than what you paid earlier.

Hoteliers unsure about Input Credit

While price rise and revision are inevitable, according to hotel owners, the uncertainty about Input Credit is another concern. "The thumb rule currently is to increase prices by 8-9 percent depending on the Input Credit. Currently, we do not know how much input Credit we will receive. Even if the hotels decide to marginally increase prices for July, a revision will be made at the end of the quarter depending on the Input Credit," Holla added. Hoteliers believe that the input Credit will not be beyond 2.5 to 3 percent. While they will continue to pay their percentage of the tax and deduct Input Credit, the difference percentage, if any, will be shifted to the customers.

The prices are currently under the hotel's discretion. If you find prices relatively similar in July, do not be sure that the same will continue in August. In the case of low Input Credit in comparison to tax slab, hotels will further increase the price of food.

Lodging won't be any different

Those worried about lodging can breathe a sigh of relief. Most lodging will remain unaffected or have a marginal change in prices. Customers may end up spending a little lesser than before. "Lodging-wise, rooms under Rs 800- Rs 1,000 will remain unchanged. Anything above will more or less remain the same. Lodging had a levy of 8 percent Service Tax and 6 percent Luxury Tax. Considering that they come under 12 percent slab now, they end up benefitting out of it," Holla added.

Employment and customer retention a concern

The hotel industry is the only one to have four slabs under the GST. 5, 12,18 and 28 percent slabs have come as a burden to the industry, say, hoteliers. "Bigger concern for us now is businesses taking a hit, especially mid-level hotels. Middle-class and lower-middle class is or customer base and with price rise, they may just shift to smaller hotels under the 5 percent tax slab," Holla said. What the industry also fears is the loss of business leading to loss of jobs. "When business drops, employment is surely affected," is what the industry has to say.

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