The Ministry of Finance is actively reviewing the consideration to provide relaxation in the current GST structure, therefore the hotel and restaurant sector may soon receive GST relief. With the benefit of input tax credits (ITC), the Goods and Services Tax (GST) on the hotel and restaurant sector might be raised from 5 per cent to 12 per cent.
In order to provide relief considering their rising input costs, the industry has been asking the Center to alter the current GST structure. Due to regional variations, the hotel and restaurant business has requested relief. Hotels and restaurants are currently subject to 5% GST without ITC advantages.
ET now has learned from the sources that the fitment committee of the GST Council has received a proposal from the finance ministry. The council is expected to review the proposal in the next meeting. Hotels that have a room tariff of more than Rs 7500 attract 18 per cent of the GST rate with the input tax credit.
ITC (Input Tax Credit) is structured to avoid the stream of taxes. This mechanism can be understood as the tax on tax. The Central Government levies credit of taxes under the present taxation system. This is not available as GST payment is set out of taxes collected by State Governments or vice versa.
The GST Council, in June last year, set forth that hotel rooms below Rs 1000 will be liable for 12 per cent GST. Earlier they were free from GST. The hotels that were above the threshold limit, were liable to pay a 12 per cent tax.
At the 49th meeting of the GST Council in February, it has been decided that all pending dues of states concerning GST compensation will be cleared. The decision of reducing the GST rates on liquid jaggery or raab, tracking devices, and pencil sharpeners were also taken.
Liquid jaggery or sugarcane raab rates have been brought to nil. Earlier, it was 18 per cent, if sold in loose form. Additionally, a 5 per cent rate is applied, if it is pre-packed. The GST rate on pencil sharpeners has been reduced to 12 per cent from 18 per cent.
