GST on the hotel decreased … Then why didn’t your bill be reduced? Learn the whole ‘game’

Some time ago there was a big and good news – the government has reduced the GST on hotel rooms! Hearing this, we all thought, “Wow! Now walking and staying in hotels will be cheaper!” While planning a festive holidays, there was a pleasure in the mind that this time the hotel bill will be slightly less.

But … when you went to book the hotel, you saw that the price is almost as much as it was! So where did the ‘relief’ given by the government go? Was it a deception?

No, it is not a cheating, but a ‘game’ in the tax world that is very important to understand, because it directly affects your pocket.

Real ‘Villain’ of this story: Input Tax Credit (ITC)

The ‘villain’ of this whole story is a word – Input Tax Credit (ITC)Let’s understand it in very easy language.

What used to happen earlier? (When GST was more and ITC was received)

• Think, you own a hotel. You have to buy a lot of things to run your hotel – such as washing of bedsheets, cooking items, servicing of AC etc. You give GST to the government on all these things. This is called ‘Input tax’,
• Now, when a customer stops with you, you also charge GST on the bill. This is called ‘Output tax’,
• According to the old rule, you used to say to the government while paying tax from your pocket, “Sir, I have taken a GST of ₹ 300 from the customer, but I have already filled the GST of ₹ 100 on washing and goods. So I will only be left (₹ 300 – ₹ 100) = ₹ 200.”
• This ‘exemption’ from the government Input Tax Credit (ITC) They say.

what happens now? (When GST is reduced and ITC is over)

• When the government reduced the rate of GST at hotels, he also said that now this ‘discount’ of ITC Will not get,
• Now the owner of the hotel has to give the entire ₹ 300 (for example) the entire recovered from the customer. Washing and luggage that he had filled with his pocket of ₹ 100, now it is now straightforward Loss Done.

So what did the hoteliers do?
He made his room to compensate for this loss Extended the basic price itself,

Understand the whole math:

• Old Bill: (Room: ₹ 4000) + (18% GST: ₹ 720) = ₹ 4720
• New Bill: (Room: ₹ 4300) + (12% GST: ₹ 516) = ₹ 4816 (Almost the same)

Have you seen? The hoteliers increased the original price of the room so much that even after the GST was reduced, almost the same money is going from your pocket.

The essence is:
The relief given by the government by reducing the GST could not reach your pocket. She went in the middle to compensate for the loss of the hotel industry, which was being done to them due to the end of ITC. So, next time you see the hotel bill, don’t be surprised!