Hotels in India are seeing cancellations of domestic conferences following a new tax regime that allows only tax off-sets for business events conducted within the home state of the host company.
The Input Tax Credit (ITC) comes with India's newly introduced Goods & Sales Tax (GST). For hotels, the level of tax ranges from 12 per for room rates of 1,000 to 2,499 rupees (US$15.60 to US$39) to 28 per cent for room rates of more than 7,500 rupees.
Hotels in India see a reduction in event bookings due to new tax rules
According to Dilip Datwani, president, Hotel and Restaurant Association of Western India (HRAWI), hotels across the country are in a fix now.
"Advance event bookings are being cancelled and new ones are not happening. Many companies are considering holding their events in the home state where they are registered for GST," said Datwani, who added that while companies have accepted "the high GST", the new tax structure becomes "unviable" without the ITC.
For Lords Hotels & Resorts, the impact of the ITC requirement is an eight per cent loss of conference bookings since July.
Pradeep Jain, associate vice president – finance with Lords Hotels & Resorts, told TTGmice that his stakeholders are also fearful of losing business to neighbouring countries.
"Many of our neighbouring countries not only tax less than half of what is required for hospitality services in India, but also a few of them provide tax refunds. (This issue) is essentially diverting business away from the country and we hope that the government addresses this at the earliest," said Jain.
When asked if the ITC requirement is at least helping to increase the number of home-based events within each state, industry players said no.