Budget 2024: Tourism industry demands major GST change, check details

Budget 20245-25: The travel and tourism industry on Wednesday called on the government to introduce a uniform 12 per cent Goods and Services Tax (GST) rate on hotels in the upcoming Budget for 2024-2025 to enhance domestic and inbound tourism.

Industry leaders highlighted that the current tiered GST structure, which varies based on hotel room tariffs, leads to price disparities. For instance, a room night costing Rs 10,000 is taxed at 18 per cent, while an off-season rate of Rs 7,000 is taxed at 12 per cent. They argue that this system complicates pricing strategies for hotels.

Rajesh Magow, Co-founder and Group CEO of MakeMyTrip, stressed the need for a simplified tax regime. "We urge the finance minister to consider a uniform GST rate of 12 per cent on hotels in Union Budget FY25. This will help simplify compliance processes," Magow said. He also pointed out the need to eliminate disparities between e-commerce operators and suppliers. "Currently, a customer pays a 5 per cent GST charge when booking a non-AC bus through an e-commerce platform, whereas this charge is zero for a direct booking from a bus operator, regardless of the booking mode," he explained.

Magow further advocated for tax incentives for hotels and homestays adopting sustainable practices. He noted that such measures align with India’s commitment to the United Nations Sustainable Development Goals (SDGs), specifically SDG 11 (Sustainable Cities and Communities) and SDG 13 (Climate Action). "By offering tax incentives that promote eco-friendly measures in the tourism sector, such as energy-efficient lighting, water-saving devices, and waste-reduction practices, the finance minister will be encouraging the industry to contribute to these global goals," Magow added.

Pradeep Shetty, President of the Hotel and Restaurant Association (Western India), echoed these sentiments. He urged the government to prioritise the tourism and hospitality sector, which contributes around 10 per cent to India’s GDP. "Granting infrastructure status to hotels and convention centers with project costs of Rs 10 crore and above is essential for attracting investments and accelerating growth in the hospitality sector," Shetty stated.

Shetty also highlighted the high GST rates for hospitality, which are among the highest globally, making tourism expensive. "We urge the abolition of the 18 per cent GST category for hotels with room rates above Rs 7,500 per night, merging it with the 12 per cent GST category to boost both domestic and inbound tourism," he said. Additionally, Shetty called for a national e-single window clearance system for hotels and restaurants through the Hospitality Development Promotion Board to reduce costs and improve competitiveness.

Madhavan Menon, Executive Chairman of Thomas Cook (India) Limited (Thomas Cook, SOTC, Sterling Holidays, and TCI), proposed the exemption of Section 53 of GST for travel agents. "This will not cause any revenue loss for the government, as airlines are already discharging tax on their sales. We also recommend lowering the Tax Collected at Source (TCS) to 1 per cent. If not, a standardisation at 5 per cent on foreign travel packages (against the current 5 per cent and 20 per cent slabs) would be beneficial," Menon suggested.

The industry’s unified call for a simplified GST structure and supportive measures aims to boost India’s tourism sector, making it more competitive and sustainable.