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Soaring tax per cent reduces occupancies in luxury hotels

Wednesday, August 16, 2017, 11:15 Hrs  [IST]

According to an Economic Times report, occupancies in hotels that charge INR 7,500 or more a night have dropped in the first month after the country rolled out goods and services tax (GST), according to online travel sites. But they have seen higher bookings for midrange and budget properties.

A levy of 28 per cent, the highest rate under GST, is imposed on hotels with room tariff of INR 7,500 or more. Those that charge less face GST at 12 per cent 18 per cent. 

Online travel portals like, Cleartrip and Travkart said this has apparently affected the sentiment towards luxury accommodation. While some hotels have reduced tariffs to escape the higher levy, industry executives said such a high rate of tax will hurt an industry which is a major earner of foreign exchange. 

“The Yatra monsoon survey revealed that 56 per cent respondents said their preference for luxury travel has been affected following GST. Additionally, post GST, budget accommodation has become more affordable and a preferred option for frequent travellers. The quality of budget hotels has also improved over the years contributing to their preference,” said Sharat Dhall, COO (B2C),
“We believe the hotel ecosystem will soon find ways to minimise the impact of the new tax regime. For instance, many hoteliers whose rooms were earlier priced between INR 7,500 and 8,000 have brought down the price to under INR 7,500 to cushion the consumers against the 28 per cent GST slab,” said Subramanya Sharma, Chief Marketing Officer, Cleartrip. 

TravKart said that it had seen many travellers postponing their itineraries and even diverting to international destinations post the implementation of the GST rates. “Due to increase in taxes, overall costing has been hiked and travellers are opting for international destinations like Thailand, Sri Lanka and Dubai as alternative options,” said Manheer Singh Sethi, Cofounder, TravKart.


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