GST Update on Declared Tariff- Hotel Industry

GST Update on Declared Tariff- Hotel Industry

Notification No. 13/2018-Central Tax (Rate) dated 26^th July, 2018 has been issued making amendments to Notification No. 11/2017 – Central Tax (Rate). These amendments shall come into effect from 27^th July, 2018.

One of the amendments in this notification is reproduced as following,

“in items (ii), (vi) and (viii),-

(A)for the words “declared tariff” wherever they occur, the words “value of supply” shall be substituted;

(B) the Explanation shall be omitted;”

Earlier the GST rate on accommodation services provided by hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes depended on the Declared Tariff. This implies that the declared tariff shown at the reception or website was taken and rate of tax was decided on the same. It has nothing to do with the actual tariff charged from the client. This can be understood with the help of an example. Suppose, the room declared tariff displayed by hotel is Rs. 8000/- per day. Hence, the GST @ 28% is charged on the same room as the declared tariff is above Rs. 7500/-. But now the price is negotiated and actual amount charged from the client is Rs. 6500/-. Although it is below Rs. 7500 but the rate of 28% will be charged from the client. However, it will be charged on Rs. 6500/- only. Hence, it has complicated the position i.e. rate will be decided on the basis of “declared tariff” but the tax will be charged on actual amount charged from the client.

But by way of aforesaid notification, the term “declared tariff” has been substituted by the term “Value of Supply” which means that the GST rate will be decided on the basis of actual amount charged from the client as well as GST amount is also calculated on this value only. Take the example above. The rate of tax will be decided on the value of supply i.e. Rs. 6500/-. Hence, the rate will be 18% as it is between Rs. 2500/- to Rs. 7500/-. The GST will be calculated on Rs. 6500/- @ 18 % only.

This implied that there is no relevance of “declared tariff” now onwards. We should not reach at conclusion so fast. No change has been made in respect to the rate applicable on the restaurants. This shall be dependent on the declared tariff itself. If the declared tariff is above Rs. 7500/- then the rate of tax for restaurants will be 18% but if the declared tariff is below Rs. 7500/- then 5% will be charged.

Say in above example, Hotel has restaurant also. The person staying in that room where he is paying GST @ 18% on 6500/- room but the declared tariff is Rs. 8000/-. As declared tariff is more than Rs. 7500/- then the person eating in restaurant will be paying tax @ 18% on bill of restaurant.
Hence, the concept of “declared tariff” has not lost his complete relevance. It is still relevant on decision of rate of restaurant in a hotel. Hotel cannot publish the tariff at its will. It is still relevant for decidinga rate of tax. Think before declaring high tariff at reception or website…..

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GST Update on Declared Tariff- Hotel Industry

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