The hotel and restaurant industry could get a relief in GST soon as the Ministry of Finance is actively considering the proposal to provide relaxation in the current GST structure. The Good and Services Tax (GST) on the hotel and restaurant industry could be increased to 12 per cent from 5 per cent, with input tax credit (ITC) benefit.

The industry has been requesting the Centre to change the current GST structure in order to provide relief considering their increased input cost. The hotel and restaurant industry has asked for relief due to location-based differences. At present, hotels and restaurants attract 5 per cent GST without ITC benefits.

Sources told ET NOW that the finance ministry has sent the proposal to fitment committee of the GST Council which is expected to consider the proposal in the next meeting. However, hotels where the room tariff is above Rs 7,500 attract GST at the rate of 18 per cent with input tax credit.

ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is ‘tax on tax’. Under the present system of taxation, credit of taxes being levied by Central Government is not available as set-off for payment of taxes levied by State Governments, and vice versa.

In June last year, the GST Council announced that hotel rooms below Rs 1,000 will attract 12 per cent GST. Hotel rooms below Rs 1,000 were earlier exempt from GST and those above the threshold were charged 12 per cent tax.

49th GST Council Meeting

The GST Council at its 49th meeting in February decided to clear all pending dues of states pertaining to GST compensation. The Council also approved reducing the GST rates on liquid jaggery or raab, pencil sharpeners and certain tracking devices.

Rates on liquid jaggery or sugarcane raab has been brought to nil from 18 per cent earlier if sold in loose form. In case it is pre-packaged, the rate has been reduced to 5 per cent. GST rate on pencil sharpeners is cut to 12 per cent from earlier 18 per cent.

Source: ET Now 
https://www.etnownews.com/news/gst-relief-for-hotels-restaurants-soon-govt-to-change-gst-structure-exclusive-article-98911781