Love-Hate relationship of Tourism and GOI.

-

 Having stepped out of financial markets for the last two months, the tax world has caught me by the collar. But this Tax world is no less fascinating, interesting, frustrating and as unfair as any other.

22 September 2025 is set to be the next significant milestone in India's indirect taxation system - Focussing on simplifying the Tax Structure.

What caught my eye in recent days was the request by Hotel Industry for clarification and relief on the reduction of GST from 12% to 5% on rooms in 1k to 7.5k price range.


GST on this category has reduced from 12% to 5%, but without ITC (somewhat similar to GTA).

Tourism seems to have a love-hate relationship with the govt.. GOI wants to promote tourism but also wants to milk as much money as it can from the same. 

Let me put numbers on it:

Old way: Room cost ₹10,000, GST @12% = ₹1,200. Your company pays ₹11,200, but you claim back ₹1,200 as ITC. So, the actual cost = ₹10,000 for registered and ₹11,200 for unregistered. Simple.

New way: The GST rate drops to 5%, so GST is only ₹500, and your total bill is ₹10,500.

BUT - and this is the big but - hotels and Online Travel Agencies can’t get back their own GST expenses anymore. So, they quietly bump up room prices to cover their losses. Maybe now those same rooms cost ₹10,500 instead of ₹10,000.

Now, GST @5% on ₹10,500 is ₹525.

Your bill: ₹10,500 + ₹525 = ₹11,025.

But the sad part? As a business, you can only claim ₹525 back, not the full chunk you got before.

Do the math:

You used to pay ₹11,200 minus ₹1,200 credit = ₹10,000 out of pocket.

Now you pay ₹11,025 minus ₹525 credit = ₹10,500 out of pocket.

That’s ₹500 extra—just because the tax credit cushion isn’t there anymore.

For Unregistered - there's a slight discount from ₹ 11200 to ₹ 11025.

----

This nightmare for business travel was there even before 22 Sep:

(Thanks to AKG for this amazing explanation)

If your Business travel is interstate, you can't (legally) claim ITC on the Hotel Bills. Place of Supply for Hotel accommodation is the location of the hotel (Section 12(3) of the IGST Act). 

Suppose you travel from Delhi to Rajasthan, the hotel there would charge you CGST+SGST, which you can claim only if you are registered in Rajasthan.

One Nation, One Tax - goes to buy oil!

Comments

Post a Comment

Popular posts from this blog

IPO Frenzy: A Hidden Leading Indicator?

-
Image
 An IPO boom is seen as market's positive sentiment. News outlets and influencers flood us with stories of high listing gains from IPOs. We often confuse it with the whole market going green forward. But data tells a different story: 1. IPOs squeeze liquidity from market - Listings, either primary or secondary, put money in the hands of company for expansion or the shareholders; leading to a cash outflow from the secondary market. 2. Correlation - I analyzed the last 18 years (2007-2024) of Nifty 50 returns against the annual number of IPOs and amount of Capital Raised. The statistical correlation between them: Nifty 50 returns against the annual number of IPOs +0.12 Nifty 50 returns against the Amount of Capital Raised +0.09 A correlation of +0.12 and +0.09 indicates a very weak positive relationship. In simple terms, knowing the Nifty's return for a year gives you almost no ability to predict the number of IPOs. But this gets interesting when we try to predict the Nifty's...
Read more

Middle East Crisis - Oil or something else?

-
Image
Next time you hear about conflicts or gas pipe shutdowns in the middle east, remember, it’s not just about your car or electricity bill — it’s about the food on your plate, and millions of Indian farmers. Whenever we talk about tensions in the Middle East, everyone immediately jumps to oil and logistical disturbances. But here's the twist — it's fertilizers that we need to start worrying about. And for India, it's a big deal. Here's how it connects The Middle East isn't just about oil; it’s also a fertilizer powerhouse, especially for nitrogen-based fertilizers like urea (made from natural gas). Now with conflicts disrupting natural gas supply (especially after recent tensions involving Israel, Iran, and Egypt), fertilizer plants in the Middle East have shut down. That’s squeezed the global supply — and prices are already rising. (Refer Image) We are the second-highest fertilizer consumer in the world. And for some more than half of it is imported. For some types —...
Read more

TikTok, Trump, and the World’s Weirdest Love Triangle

-
Image
A national weapon. A national threat. A political strategy. The Tiktok-Trump saga is an epic case of how a naive start-up became the epitome of geo-political tug-of-war between world's 2 biggest powers. That start-up marked a turning point in how we consume content globally. ByteDance (parent of Tiktok) founded in 2012, launched a short video app - "Douyin" for Chinese market in 2016. The app named as TikTok for international market was launched in 2017. In 2018, it was among the most downloaded app. The growth was immense, establishing it among the top social media platforms. Here are some key stats that frame the power of social media in today’s world: - 5.24 billion people (63.9% of the global population) currently use social media worldwide, up more than double from 2.07 billion in 2015 - The average social media user engages with an average of 6.83 various social media platforms - Globally, the average time a person spends on social media a day is 2 hours 21 minutes ...
Read more