Investors check into hotels post GST rate-cut

To counter economic slowdown, the government has been taking various steps in recent days. One among such steps includes the recent GST announcements made on Saturday. Apart from raising tax on carbonated beverages, the government has announced its decision to reduce tax rates on hotel tariffs.

Under the new changes, tariffs upto Rs. 1000 per night will be exempted from GST. Tariff between Rs. 1,001 to Rs. 7,500 per night would now attract tax rate of 12 per cent, from 18 per cent earlier. Tariff above Rs. 7,500 per night would now attract tax rate of 18 per cent, from 28 per cent earlier.

Owing to new GST rates, the hotels are expected to pass on the rate cuts to customers by reducing the room rates. This will in turn boost demand across hotel segments gradually. There are fare chances of India becoming more attractive and competitive as a tourist destination in the coming quarters. This is a great news for the hotel industry as it was witnessing lower occupancy rates in past two quarters due to elections in first quarter and then followed by weak season.

Reacting to the favourable GST rate cut announcement, most of the listed stocks of hotel companies gained in Monday trading session. Shares of Royal Orchid Hotels gained nearly 16 per cent and share of Indian Hotels gained nearly 10 per cent intraday. Also, shares of Lemon Tree Hotels gained nearly 13 per cent. Shares of ITC, whose Hotel business contributes around 3 per cent to the total revenue in Q1FY20, gained nearly 9 per cent.