Despite GST rate cut, Karnataka Hotels Association flags inability to reduce prices — here's why

The Karnataka State Hotels Association have expressed the inability to pass on goods and services tax (GST) rate cut benefits to consumers due to unchanged taxes on LPG and property rent. The industry body urged the government to reduce GST on property rent to help hotels remain competitive, news agency PTI reported.

The association has requested the government to provide relief by reducing the GST on property rent, to help hotels stay competitive in the market.

The development follows the GST Council's decision, which includes the Centre and states, to cut tax rates on approximately 375 goods and services starting from September 22, the first day of Navaratri.

What are the concerns of hotel industry?

The association's president, GK Shetty, lauded the government's decision to lower the GST on several items, stating it would benefit the general public.

"People are asking when hotel food and room tariffs will be reduced," news agency PTI quoted Shetty as saying. He clarified that hoteliers are unable to reduce prices at this point unless they receive support from the government.

Shetty noted that vegetables, meat, and other items have been exempt from GST since the beginning, while the 18 per cent GST on cooking gas cylinders has remained unchanged.

"In addition, hoteliers who run their business from rented buildings are paying 18% GST on the rent they pay," he said.

Shetty mentioned that since most restaurants and hotels operate from rented premises, a reduction of GST to 5 per cent on rent would allow us to pass the savings on to consumers. "With the present GST rate, it is not possible to offer any relief to consumers," he said.

GST reforms

On 3 September, Union Finance Minister Nirmala Sitharaman announced a set of GST reforms following the 56th GST Council meeting. Several items were moved to the nil GST regime, and many goods were shifted to 5% or 18% slabs from higher rates. The four slabs were brought down to two rates of 5% and 18%. Additionally, a special 40% GST rate was introduced for select goods such as high-end cars and tobacco.