Online travel agencies (OTAs) have sought clarity from the Central Board of Indirect Taxes and Customs (CBIC) regarding the new GST rules on hotel bookings. According to CNBCTV18 sources, OTAs have expressed concern over the removal of input tax credit (ITC) benefits on hotel rooms priced below ₹7,500 per night. They say this move will harm their business and increase costs for customers.
What is the new rule?
Under the new GST rules, hotel rooms priced below ₹7,500 per night will be charged a 5% GST. However, they will no longer be eligible for input tax credit (ITC). OTAs say they previously paid GST on bulk bookings from hotels and transferred this GST to customers at the time of booking through ITC.
What are OTAs’ concerns?
Cost Increase: OTAs told the CBIC that the removal of the ITC benefit will increase their costs. They will not be able to take credit for previously paid taxes.
Customer Burden: This could increase the final cost of hotel bookings for customers.
Budget and Mid-Scale Hotels: OTAs warned that the removal of the ITC benefit will hurt budget and mid-scale hotels the most. They may face fewer bookings due to increased customer costs.
OTAs say the removal of the ITC undermines the fundamental principle of seamless credit under GST.
Demand for Immediate Intervention
OTAs have demanded immediate government intervention. They say the new rules will not only impact their business but will also result in higher prices for customers. OTAs have appealed to the CBIC for clear guidelines on this issue and the restoration of the ITC benefit.
