Indore: It is jubilation time for 132 owners of small hotels, restaurants and dhabas in city as they will be able to avail of a composition scheme and pay a flat tax of 5% after the GST Council fixed lowest rate for them. According to experts, the move will help to boost tourism and employment.
With Cabinet clearing four legislations for implementing GST on Monday, the revolutionary indirect tax regime is all set to roll out from July 1 this year. The bills are likely to be introduced in parliament in next few days and after presidential ascent of the bills, the GST will virtually become a reality. Officials inform that while finalising the GST structure, interest of small hotels and restaurants are well taken care of as they are a major component of tourism promotion and source of employment of unskilled population.
The Council decided to levy a 5 per cent GST (2.5 per cent by Centre and 2.5 per cent by state) on small hotels, restaurants and dhabas with an annual turnover of up to Rs 50 lakh. There was a great demand from tourism and hospitality industry that small hotels and restaurants should be included in the composition scheme, particularly those with fewer turnovers. Addressing their demands the council decided to avail them composition scheme for restaurants up to a turnover of Rs 50 lakh.
However, remaining restaurants i.e. having turnover above Rs 50 lakh will come in the regular service tax rate. Besides hotels and restaurants, the maiden meeting of GST Council held on September 23, last year had decided that composition scheme in GST regime would be applicable on trading and manufacturing units with up to Rs 50 lakh turnover.
The composition scheme provides an easier method of calculating tax liability and allows GST registration for dealers with turnover below the compounding cut-off. The scheme is being introduced to reduce the administrative cost associated with collection of tax from small traders. Hence, businesses below a turnover of Rs 50 lakh can pay taxes at a defined floor rate of 1 per cent, and manufacturers can pay at 2 per cent, much lower than the GST rate. For services, it would be 5 per cent.
“GST Council has unanimously fixed GST rate for small hotels, restaurants, guests’ house and dhabas at 5%. Considering importance of the hospitality sector, which largely contribute in offering job to unskilled people and also promoting tourism, the rate are being fixed at lowest level. Further the sector will be benefited to get enjoy composition facility.”
RS Goyal, Exponent of GST
“We are quite jubilant over the decision of GST Council about keeping GST rate 5% for hospitality sector which include hotels, restaurants, guest house and dhabas having turnover up to Rs 50 lakh per anum. This decision will definitely help in boosting tourism and hospitality sector of the city. Also help in further generating employment for unskilled people.”
Mahendra Desai, Vice President, JMC Hospitality Group. Indore
Hospitality sector at a glance
There are 1100 restaurants and hotels in the city. As per figures of hotels association of the city there are 132 hotels, guest’s house and restaurants whose annual turnover is below Rs 50 lakh. There are 63 hotels whose turnover is between Rs 50 lakh and Rs 25 crore per annum.