Post the Goods and Services Tax (GST) roll out earlier this month, the MICE related activities have been hit hard, as pointed out by Hotel and Restaurant Association of Western India (HRAWI). One of the anomalies that emerged post GST roll out was that MICE activities and other events held in hotels outside of home state are not eligible for Input Tax Credit (ITC). This has been leading to cancellations and postponements for pre-booked events. Given the emergence of MICE tourism as one of the fastest growing segments, and its potential to disrupt growth, HRAWI has appealed to the government to revisit this particular aspect of the GST.
“There is an overall reduction in MICE bookings across hotels in India as compared to the same period last year. Advance bookings are being cancelled and new bookings are not happening. Most companies are considering holding events in the same state where they are registered under GST. Businesses may still have digested the high GST, but without ITC, it just becomes unviable. MICE tourism is too important a segment for the nation to overlook,” said Dilip Datwani, president, HRAWI.
Talking about the GST slabs for the industry he added, “The 28 per cent GST rate for rooms with tariff of INR 7500 and above is one of the highest in the world and will seriously affect cash flow. Moreover, the tax percentage will be determined based on the published or declared rate which is creating a lot of hardship for the industry. The association has appealed the government to remove this condition and determine the tax percentage based on the actual transaction value and has also requested to review the ITC clause for interstate accommodations.”
The disruption following the GST rollout comes close on the heel of liquor ban on highways. With revenues already hit, this comes as a double whammy. Many hotels will find it difficult to sustain business and may close down or may have to scale down operations which are expected to result in job losses and de-growth.
“The non-refund or non-receipt of ITC for businesses holding MICE in states other than the ones they operate in is the biggest drawback of GST for hospitality. ITC is available if the entity arranging the MICE has their GST registered in the state where it’s held and also unfortunately ITC on Integrated Goods and Services Tax (IGST) is not applicable for the hotel industry. Not receiving a set-off for an expense will be discouraging for any business to conduct MICE outside of their state. This will translate to such enterprises either holding MICE in their respective states or they go to a country where not only the taxes are lower but also mostly get the tax refund by that country on exit. We are engaging with the tourism ministry in this regard and hopefully the clause will be altered to encompass MICE for ITC,” said Kamlesh Barot, past president, HRAWI and Federation of Hotel and Restaurant Associations of India (FHRAI).
Meanwhile, the hospitality industry recently received clarity on the tax rates applicable for luxury or five star hotels. Luxury hotels were to levy a default 28 per cent GST irrespective of the room tariffs. However effective immediately the GST rate even for these hotels will be based on the published tariff rates and only if the tariff is INR 7500 and above then will it attract a GST of 28 per cent.