FHRAI has written to Nirmala Sitharaman, Union Finance Minister flagging anomalies in GST regulations, specifically the shift from “declared tariff” to “value of supply” in Heading 9963 (Accommodation, food and beverage services).
FHRAI stated in the letter written to Sitharaman, “In GST amendments, “declared tariff” lost its significance in determining whether a supply of accommodation services is exempt or not or in determining the rate of tax applicable to such services. Consequently, the definition of “declared tariff” was omitted. Therefore, the transaction value as “value of supply” took precedence for determining the rate of GST. Thus, with effect from 27 July 2018, GST on hotel room tariff was determined based on the value of supply, that means on the value actually charged in the invoice, not on the declared value. This has led to confusion and disputes over the classification of restaurants leading to divergent business practices and resultant repercussions. The confusion includes the impact on Input Tax Credit (ITC), the validity of the rate of tax without ITC, among other issues.”
