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IMPACT OF GST ON HOSPITALITY INDUSTRY

IMPACT OF GST ON HOSPITALITY INDUSTRY. By : CA Varun Khandelwal Partner M/s Khandelwal Sharma & Co, CA k.cavarun@gmail.com.

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IMPACT OF GST ON HOSPITALITY INDUSTRY

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  1. IMPACT OF GST ON HOSPITALITY INDUSTRY By : CA Varun Khandelwal Partner M/s Khandelwal Sharma & Co, CA k.cavarun@gmail.com Khandelwal Sharma & Co, Chartered Accountants

  2. Khandelwal Sharma & Co, Chartered Accountants Hospitality industry is a versatile field encompassing accommodation and entertainment services, accounting, food and beverage, event management and above all, guest satisfaction.

  3. Khandelwal Sharma & Co, Chartered Accountants Impact Analysis Of GST On Indian Hospitality Industry • Hotel Sector is always on priority by Govt and as such tax reliefs in form of abatement / exemptions is provided to them under notification 26/2012-ST and 25/2012-ST • Hotel Industry including tourism contributes 6.23% of national GDP and 8.78% of total employment in the country. • This industry definitely help in building the nation and is going beyond the borders.

  4. Khandelwal Sharma & Co, Chartered Accountants Present Applicability of Taxes on Hospitality

  5. Khandelwal Sharma & Co, Chartered Accountants Present Applicability of Taxes on Hospitality • Combine VAT + Service Tax + Luxury Tax , the levy would range between 20% to 27 %. • Cascading effect due to non set off of Central Tax against State Tax or vice versa. • Present Service Tax Rate is 14% + 0.5% + 0.5% = 15 %. • Cenvat Credit of Service Tax is available • Cenvat Credit of SBC = Not Available • Cenvat Credit of KKC = Available

  6. Khandelwal Sharma & Co, Chartered Accountants Rates on Hospitality Sector as approved by council

  7. Khandelwal Sharma & Co, Chartered Accountants Rates on Hospitality Sector as approved by council

  8. Khandelwal Sharma & Co, Chartered Accountants Comparison Chart

  9. Khandelwal Sharma & Co, Chartered Accountants Comparison Chart

  10. Khandelwal Sharma & Co, Chartered Accountants Comparison Chart

  11. Khandelwal Sharma & Co, Chartered Accountants Comparison Chart

  12. Khandelwal Sharma & Co, Chartered Accountants Comparison Chart

  13. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Hospitality Industry • This industry presently faces multiple tax regime and is a victim of tax over tax.  GST will help reduce multiple taxation, giving a significant boost to the hospitality and tourism industry. • The states which apply luxury tax on rack rates; like Tamil Nadu, Gujarat, Delhi and Andhra Pradesh, and those states which have high luxury taxes; like Kerala, have a total tax summed up to 19-25 percent. The effect of GST will be positive, leading to a considerable reduction of 3.5-7% in taxes respectively. c) The states which levy lower luxury rates like Maharashtra, the impact of GST will be fairly neutral.

  14. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Hospitality Industry • Service providers having centralized registration will have to get registered in each state whether providing hotel services on own account or through agent (franchise). • Service providers will have an option to take different registration or separate business verticals which needs to be examined on case to case basis. • The procedure for all the invoices / receipts towards inward and outward supplies will become cumbersome as each one of them will have to be uploaded in the system. • The frequency and number of returns to be filed will go up. • Alcohol is out of the purview of GST net. The taxation on alcohol would be different than the single GST rate. Thus, the hotel industry would not be able to avail the input credit on the alcohol which will have a negative impact on this sector.

  15. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Hospitality Industry • In the luxury taxes act of some states, there are exemptions available on the basis of rate per day of accommodation. Such exemption on rate basis may not be available in the GST regime. • Now, in GST Regime the ITC on Inputs, Capital Goods and Input Services shall be available. • As per section 10(1)(b) of CGST/SCGST Act, the services provided by the restaurants whose aggregate turnover in the previous financial year does not exceed 50 lacs shall pay 2.5% as CGST and 2.5% as SGST, totalling to 5% under composition scheme. The composition restaurant suppliers will not be entitled to input tax credit. • Section 9(3) – A draconian provision for the restaurant and hotels. • Some questions still remain unsettled / unanswered. There are bound to be classification issues as well as litigation. Eg. Ordering through groupon/nearbuy, having dinner in a room of hotel.

  16. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Hospitality Industry • In the luxury taxes act of some states, there are exemptions available on the basis of rate per day of accommodation. Such exemption on rate basis may not be available in the GST regime. • Now, in GST Regime the ITC on Inputs, Capital Goods and Input Services shall be available. • As per section 10(1)(b) of CGST/SCGST Act, the services provided by the restaurants whose aggregate turnover in the previous financial year does not exceed 50 lacs shall pay 2.5% as CGST and 2.5% as SGST, totalling to 5% under composition scheme. The composition restaurant suppliers will not be entitled to input tax credit. • Section 9(3) – A draconian provision for the restaurant and hotels. • Some questions still remain unsettled / unanswered. There are bound to be classification issues as well as litigation. Eg. Ordering through groupon/nearbuy, having dinner in a room of hotel.

  17. IMPACT OF GST ON TEXTILE SECTOR Khandelwal Sharma & Co, Chartered Accountants

  18. Khandelwal Sharma & Co, Chartered Accountants About Textile Industry • One of the oldest Industries • One of the largest contributors to Indian Exports. Contributing about 11% of total exports of the country. • Largest labour employment industry. • The Textile industry can be broadly classified into two segments: • Yarn & Fibre (Natural & Man-made) • Processed Fabrics, Ready-made garments & Apparels

  19. Khandelwal Sharma & Co, Chartered Accountants Current Taxability on Textiles • In 2004, exemption was granted on textile articles falling under chapter 61, 62 and 63 from duty of excise by issuing Notification No. 30/2004 • It was again subjected to duty in 2011-12. After remaining liable for one year, it was rolled back by then finance minister P Chidambaram and since then textile was out of central excise purview. • In Union Budget 2016-17, branded readymade garments has again been made liable to duty of excise. • Notification No. 15/2016-CE has been issued amending the original exemption notification 30/2004 . By Virtue of this exemption is withdrawn on all goods falling under chapter 61, 62 and 63 of CETA bearing a brand name or sold under a brand name and having a retail sale price (RSP) of Rs.1000 and above. There would be two options for payment of duty: 2% without Cenvat and 12.5% with Cenvat.

  20. Khandelwal Sharma & Co, Chartered Accountants Current Taxability on Textiles e) Most of the textile products are either exempt or are taxed at a relatively lower rate and are extensively subsidized under different central and state regimes. Exports have continued to be free from taxes. • Non-branded goods continue with “Nil” levy without CCR benefit. Otherwise, option of paying 6% with CCR in case of garments / articles of cotton, not containing any other textile material is available. • Job Work In garment industry many times, brand name owners outsource the goods manufactured completely or on job work basis. There are special provisions that the central excise duty levy which in normal course should be with the job worker gets shifted to brand name owner. Such brand name owner instead of job-worker needs to register and comply with excise provisions. Brand name owner alternatively could authorize his job-worker to obtain registration and pay the duty on goods. • Most of the states in India has exempted textiles and fabrics from levy of VAT. Garments including textiles are being subject to lower rate of VAT in many states. For example, in Karnataka state, ready made garments and other articles suffer lower rate of 5.5% tax. Textiles are exempted from VAT. • For small players, the option of paying taxes at concessional rates is also provided under composition scheme in many states.

  21. Khandelwal Sharma & Co, Chartered Accountants Comparison between current rates vis-à-vis GST Rates

  22. Khandelwal Sharma & Co, Chartered Accountants Issues in Current Tax Structure

  23. Khandelwal Sharma & Co, Chartered Accountants Issues in Current Tax Structure

  24. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Textile Sector

  25. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Textile Sector

  26. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Textile Sector

  27. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Textile Sector

  28. Khandelwal Sharma & Co, Chartered Accountants Impact of GST on Textile Sector

  29. Thank you !! Khandelwal Sharma & Co, Chartered Accountants

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