GST to boost Hospitality and luxury industry

By | August 6, 2016

Proposed GST Rate at 18% to Boost Luxury Retail, Hospitality Sectors

Hospitality and luxury industry experts have said implementation of GST (goods and services tax) will benefit the sectors by lowering costs for consumers and facilitating seamless movement of products across the country. The Rajya Sabha on Wednesday voted to approve a constitutional amendment that will help bring in GST, which will harmonise a plethora of taxes and cut business transaction costs. A government-appointed panel has proposed 17-18% as GST which is much lower than what the hospitality and luxury sectors currently face. “The implementation of GST will definitely be a huge shot in the arm for the luxury retail industry , as it will result in benefits due to service tax set off possibilities, and ease out processes and movement of goods within the country ,“ said Nikhil Mehra, chief executive officer of Genesis Group, which retails brands like Burberry and Giorgio Armani, and Canali in India. “That helps us grow the business for our partner brands in India and, hence, encourages them to invest more in the long run in India, which is overall good for the industry .“ Paresh Parekh, partner at EY, said excise, VAT and other taxes amount to upwards of 20% for the luxury sector. “If GST is estimated to be around 18%, it will be positive for the sector and will also help address existing supply chain concerns,“ he said.
Yasho Saboo, CEO of Ethos Watch Boutiques, said the luxury sector will benefit if the uniform tax is pegged at 18%. “Companies like ours can seamlessly move products between different markets in India without having to worry about the additional taxes and time delays and concerns around documentation,“ he said. According to experts, companies specialising in food and beverages operations could be the biggest beneficiaries of GST within the hospitality sector. “Food and beverages bills have multiple components and can inflate the bills by 30-35%.A single-slab tax will benefit consumers and should lead to savings of 10-15% on the overall bill,“ said Achin Khanna, managing director of the consulting and valuation practice at consulting firm HVS.
“Everybody likes consolidation of taxes as it leads to greater transparency and will help guests and buyers understand overall costs. We welcome the development,“ said Raj Rana, CEO, South Asia, for hotel group Carlson Rezidor.
“Some states have luxury tax and that impacts room rates. If India aspires to be competitive, then the tax structures too need to be competitive.“ Experts said entertainment, luxury and other service taxes in hospitality amount to more than 22%, compared with the proposed 18% under the GST regime. “Overall, GST should be positive for the sector assuming the multiplicity of taxes will go away in food and beverages. However, it will be interesting to see the impact of GST in accommodation services, which enjoy a tax rate of 9%,“ said Suresh Nair, partner at EY’s indirect tax practice. – www.economictimes.indiatimes. com [05-08-2016]

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