Companies operating midmarket and upscale hotels are at risk of losing their restaurant customers due to a discrepancy that sees their diners charged higher goods and services tax (GST) than those at standalone restaurants.
The current GST calculation method for standalone restaurants and restaurants within hotels differs significantly. While standalone restaurants are subject to a flat 5% GST, patrons who dine at restaurants inside hotels have to pay more than three times the rate at a hefty 18%. This tax rate comes into effect when a hotel company declares a room tariff that exceeds ₹7,500.
The higher rate of GST on dining applies even to non-hotel guests dining at a property.
Hoteliers have expressed concern that this disparity-which has been in force since 2018-is driving customers away from their restaurants, who are opting for standalone establishments that offer lower taxes.
They argue that a flat 5% GST for all restaurants would create a more level playing field and benefit the industry as a whole.
At a time when standalone restaurants are doing well, and the competition is already fierce, the hotel industry wants to know why a hotel room rate should have any significance for dining options.
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