The rates announced by the Goods and Services Tax Council are like a shocker to the tourism sector in India. Four tax slabs of 5, 12, 18 and 28 per cent have been fixed for services including telecom, insurance, hotels and restaurants.

Expressing disappointment, the hospitality sector says the rates are too complex, high and uncompetitive, and said they will be approaching the Central Government for a review of the rates. The GST Council announced that non-AC restaurants will charge 12 per cent GST on food, AC restaurants and those with liquor licence 18 per cent, and five star hotels will charge a GST of 28 per cent.

A spokesman of the Hotel and Restaurant Association said, 'The government should realise that taxes in neighbouring countries like Myanmar, Thailand, Singapore, Indonesia range between 5 and 10 per cent. We cannot afford to have this complex and high-rate GST. This is simply not viable. Tourists will simply skip India.'

A major hurdle for the hospitality and tourism sector in India is its uncompetitive tax structure. A country as small as Singapore gets over 1 crore tourists, while India gets around 60 lakh. Nations like Malaysia and Thailand attracted 2.4 crore and 2 crore tourists in 2014 and earned foreign exchange worth $18.3 billion and $26.26 billion respectively. In contrast, India managed only $94 million.

Hotels and lodges charging a tariff of Rs 1,000 per day will be exempt from GST, while those charging up to Rs 2,000 per day will pay 12 per cent. Hotels charging Rs 2,500 to Rs 5,000 will pay 18%, and those with per-day tariffs above Rs 5,000 will be levied GST of 28 per day.