Providing the option of 18% GST with ITC will encourage entrepreneurship, fair competition, and long-term industry growth.
By Sumit Mitruka, Founder & CEO, Summit Hotels
The recent GST rule mandating 5% GST without Input Tax Credit (ITC) on hotel rooms below ₹7,500 has created a serious imbalance in the hospitality industry. While the move may suit traditional hotel owners (self-owned properties with minimal online booking exposure), it has severely impacted new-age hotel entrepreneurs, who now make up over 70% of the mid- and budget-segment hotel market.
Unlike traditional players, these operators largely run on lease/rental models and are heavily dependent on Online Travel Agencies (OTAs) for business. For them, rent + OTA commissions account for 40–70% of total expenses. Under the new GST structure, the inability to claim ITC on these expenses escalates costs by nearly 18%, effectively wiping out already razor-thin margins.
This situation not only threatens the survival of thousands of entrepreneurs but also risks:
Discouraging investment and entrepreneurship in the hospitality sector.
Forcing operators to under-invoice rentals, unintentionally encouraging unaccounted transactions.
Creating market distortions, with traditional owners gaining advantage while innovative, asset-light operators are penalized.
The hospitality sector is one of India’s largest job creators, and such policies can slow down its growth momentum.
We urge the GST Council to urgently relook at this policy and provide operators with an option to pay 18% GST with ITC. This balanced approach would ensure compliance, maintain fair competition, and support entrepreneurship in the sector.