#TaxmannPPT | GST Issues faced by the Hotel Industry | Tattvam Advisors by Taxmann

Issues in Hotel industry

C.A. Geetika Shrivastava

Executive Partner : Tattvam Advisors

Important Definitions and Rates

Important Definitions

Hotel

Accommodation Services

• Supply, by way of accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places

• Meant for residential or lodging purposes including the supply of time share usage rights by way of accommodation.

Restaurant Services

• Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink,

• Provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.

Outdoor Catering Services

• Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink,

• At Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions

• That are event based and occasional in nature.

Taxability of Services

Hotel Accommodation Services

Value of Supply Rate

Value of supply of a unit of accommodation less than or equal to Rs. 7,500/- 12%

Value of supply of a unit of accommodation above Rs. 7,500/- 18%

Value of supply

Section 15(1) specifies that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

5 Restaurant Services At Specified Premises* At premises other than Specified Premises* 18% with ITC 5% with no ITC *Specified Premises means premises providing “hotel accommodation” services having declared tariff of any unit of accommodation above Rs. 7,500/per unit per day or equivalent.

Taxability

6 Outdoor Catering Services/Composite Supply of outdoor catering together with renting Categories Rate At premises other than Specified Premises* • By suppliers providing hotel accommodation at specified premises • By suppliers located in specified premises 18% with ITC • By suppliers other than mentioned above 5% with no ITC At Specified Premises* 18% with ITC Other Accommodation, food and beverage services Categories Rate Supply, of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms 5% with no ITC Other Accommodation, food and beverage service 18% with ITC Taxability of Services (Contd.) © Tattvam Advisors - All rights reserved

Issues under Outward Supply

8 Single Price • Accommodation • Breakfast Single Price • Accommodation • Breakfast, Lunch and Dinner Separate Price • Accommodation • Breakfast, Lunch and Dinner Types of Supplies Classification • Composite supply • Mixed supply • Independent supplies © Tattvam Advisors - All rights reserved Issue 1 – Classification of service In room At bar, restaurant etc.

9 Issue 2 - Package services (i.e., New Year events, Christmas events etc.) S. No. Heading Description Rate 34 9996 (recreational cultural and sporting services) (iiia) Services by way of admission to entertainment events or access to amusement facilities including casinos, race club, any sporting event such as Indian Premier League and the like 28% ✓ Hotel charges single fee for following: ▪ Supply of food ▪ Supply of beverages (alcoholic, non-alcoholic and caffeinated) ▪ Music with provision of dance, etc. © Tattvam Advisors - All rights reserved Organizing Gala Dinner- Restaurant service or event related services? Taxability on alcoholic beverages- Determination of value?

10 Additional facilities © Tattvam Advisors - All rights reserved Airport pick and drop Laundry Services, spa, salon etc. Extra Bed Charges Declared tariff includes charges for all amenities in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.

3- Time of Supply under GST

Issue

If the invoice is issued within 30 days from the date of supply of service, time of supply shall be earlier of:

• A. the date of issue of invoice by the supplier, or

• B. the date of receipt of payment,

payment © Tattvam Advisors - All rights reserved Issue 1: Dual Payment of tax in case of stay across the Financial Year Issue 2: Stay for more than 30 days Accommodation booked from 05.05.2022- 30.06.2022

13(2) A registered person supplying taxable services shall issue a tax invoice before provision of service or after the provision of service within 30 days from the date of supply Section 31(2) r/w rule 47 Accommodation booked from 29.03.202203.04.2022 Issues w.r.t TOS

2. If the invoice is not issued within 30 days from the date of supply of service, time of supply shall be earlier of: • A. The date of provision of service • B. The date of receipt of

Section

Rule 27 of the CGST Rules, 2017

Taxable or not?

Valuation

Where the supply of goods or services is for a consideration not wholly in money, the value of the supply, shall-

• Be the open market value of such supply,

• If open market value not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply.

• If value is not determinable as above, be the value of supply of like kind and quality,

• If value is not determinable as above, be the sum total of consideration in money and such further amount in money that is equivalent to the consideration not in money as determined by the application of Rule 30 or 31 in that order.

12 Issue 4 - Barter Transaction

Issue 5

Amount paid by agent to Hotel

Hotel raised invoice on the customer charging Rs. 7,000

Hotel has given the agent the discretion to fix prices provided a floor price of Rs. 5,000

The customer agreed to the price of Rs. 7,000 quoted by agent

Hotel Agent Customer

The agent pays Rs. 5,000 to the Hotel out of the Rs. 7,000 received from the customer

What would be the treatment of Rs. 5,000 paid by the agent to the hotel as per the provisions of GST?

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14 Issue 6 - Hotel Management Agreement Hotel Management Agreement Brand Owner and Operator Hotel Owner © Tattvam Advisors - All rights reserved • Licenses in his name • Invoicing to customers • Other compliance • Operation and management • Licensing Brand name Accommodation service provided by operator or hotel owner?

Issues under Inward Supplies

Section 17 of the CGST Act restricts the input tax credit on goods or services or both to so much of the input tax as is attributable to the taxable supplies including zero rated-supplies made for the purpose of business. The manner of reversal of Input tax credit is stated in the CGST Rules, 2017: • Rule 42 – Reversal of credit received on Inputs and Input services

• Rule 43 – Reversal of credit received on Capital Goods

Section 17(2) deals with the provisions where the goods or services or are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

17 ITC Reversals

Accommodation services 18%/12% Restaurant services 18%/5% w/o

Liquor Sale

ITC

No GST

18 © Tattvam Advisors - All rights reserved Goods Services Capital goods & Inputs used at head office • Computers • Storage Racks • Furniture & Fixtures • Inverters and batteries • Professional services • Telecommunication • Fees paid to ROC/ govt authorities • Travelling expenses of directors or employees • Bank charges • Loan processing fees Common ITC • Supply of liquor • Restaurant Services at concessional rate Exclusive to Liquor business Goods Services • Apparels and clothing accessories for use by bartender • Dustbin used for disposal of liquor bottles • Storage rack for storing liquor • Food articles given complimentary with liquor whose value is recovered by sale of liquor • Glass tumblers / other crockery used for serving liquor • Printing of Bar Menu • Professional services received in respect of liquor business Issue 8 – Expenses pertaining to Exempt Supply

Issue 9 - Change in tariffs during a year

Goods/Capital goods

Section 18(1)(d) read with

Reversal / availment of the ITC on the goods/capital goods

Rule 40(1)

Where exempt supply becomes taxable, person shall be entitled to take credit of input/input services. In case of capital goods, credit reduced by 5% per quarter shall be allowed

Section 18(4) read with Rule 44

Where taxable supply becomes exempt, person shall be liable to reverse credit of input/input services. In case of capital goods, credit involved in remaining useful life shall be reversed

18% 5%

20 Issue 10 – ITC in respect of Free Accommodation Auditors Employees as per HR Policy Travel Bloggers Key Managerial Personnel Doctors Nurses Input Tax Credit ?? © Tattvam Advisors - All rights reserved

person can claim ITC’ of GST paid on inward supply of goods/services that are used or intended to be used by him in the course or furtherance of his business

Section- 16 of CGST Act, 2017 Registered

shall not be available in respect of Goods or services or both used for personal consumption

Section - 17 (5) (g) of CGST Act, 2017 ITC

Act

Goods lost, stolen, destroyed, written off or disposed of by way of gifts or free samples

Section- 17(5)(g) of CGST

, 2017

11 - ITC

Cement Bricks Pipes Sand Availability of ITC on the inputs and inputs services in terms of Section 17(5)(d)

Odisha High Court ruled that input tax credit would be available for the GST amount paid on the goods or services availed for the construction of the immovable property that would further be used for the purpose of renting © Tattvam Advisors - All rights reserved

Issue

of hotel constructed

Safari Retreat

CONTACT US:-

B-96, 2nd floor Pushpanjali Enclave, Gate No 2 Above SBI bank,Delhi, 110034

JD-2C, 2nd Floor, Pitampura, Metro Pillar No. 355, New Delhi- 110034 No. 1371, Sri Nikethan, 1st Floor, 31st B Cross Road, 4th T Block East, Jayanagar Bengaluru, Karnataka – 560041

501, Sheetal Enclave, Mindspace, Nr. Tangent Showroom, Off New Link Road, Malad (W), Mumbai - 400064, India www.tattvamadvisors.com geetika.shrivastava@tattvamgroup.in

Thank You

91 99537-07107, 96507-77079