Hotel Stocks Shoot up Post GST Rate Cut on Hotel Room Tariffs

The 37th GST Council meeting took place on 20th September in Goa. The Council brought down the GST rate from 28% to 18% for hotel rooms worth Rs 7,501 and above. The GST rate was also reduced from 18% to 12% for hotel rooms, ranging between Rs 1,001 and Rs 7,500 per night. GST will not be applicable on room tariffs, which are less than Rs 1,000 per night.

The investors agreed with the move to cut down GST rates on hotel tariffs. On Monday, hotel stocks soared significantly since there was a massive drop in the GST charges. Stocks of several premium luxury hotels rose by around 5% during the previous week in expectation of a GST rate cut. As a result of this cute, there was a considerable increase in the shares of a few mid-sized hotels too.

Until the rate cut announcement was made, the mindset of consumers was on a pessimistic note. Hotels will now pass GST rate cuts to their customers via lower room tariffs. Hence, with this move, the demand across the hotel segments are set to increase.

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In addition to rate cuts on hotel tariff, the Council has also reduced GST concerning outdoor catering in institutions wherein daily tariff is of Rs 7,500 or more. Previously, it was 18%, now it has been brought down to 5%.

However, these institutions will not be able to avail ITC. The rate cut will apply to all kinds of outdoor catering. On the other hand, indoor catering within premises in a similar kind of establishments will remain at 18% along with ITC.

The hotel sector has been struggling under pressure due to the slowdown in the economy. The approved GST rate cuts will be a booster to the hospitality industry. The Council’s decision to bring down GST is expected to not only boost tourism but also generate more employment opportunities.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in