GST. Biggest Indian Tax Reform since Independence

Transcription

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2 GST Biggest Indian Tax Reform since Independence

3 Agenda General discussion on advantages of GST and its rationale. GST guidance for Hotel rooms, restaurants and service shoppes How to handle Invoicing under GST for rooms, food, ancillary items and OTAs. How to handle meals / extra beds / packages planning under GST? Who owns the guest...who should be billing the guest? Hotels or OTAs/Agents? Agent and OTA commissions and taking credit under GST. Is IGST applicable for hotels or agents/otas? Audience FAQs and Live Q&A

4 Disclaimer We are not liable to any opinion or view expressed in this presentation. The views expressed here are based on available releases of the CBEC as well as FAQs published by the government and post discussions with various tax experts till 1 st Sep Hotels are also advised to take independent opinion on the views expressed here.

5 Structure of the Webinar Only 500 participants allowed in the webinar. If you are getting bounced from here then you can also watch the LIVE Webinar on Please use the QUESTION pane on the top right hand side of your screen to ask questions. We will be taking live audience question at the end.

6 A Quick Poll

7 Why GST? A Rationale

8 What it means for accounts team 37 filings in a year

9 Need for technology to be competitive in this new regime Potential legal liabilities and penalties Your clients will not give you business if you don t file your GSTIN on time Loss of market share GSTIN Linked to Pan Card therefore potential roadblock in raising debt/loans/working capital loans etc.

10 Lets get down to specifics How should Indian Hotels handle GST?

11 GST on Room Only Well known by now <= INR 999 : 0% GST INR 1000-INR 2499 : 12% GST (6% CGST, 6% SGST) INR 2500-INR 7499 : 18% GST (9% CGST, 9% SGST) >= INR 7500 : 28% GST (14% CGST, 14% SGST) Simply enable the India GST Setting on DJUBO to enable GST settings for your property.

12 Declared Tariff Concept GST slab will be chosen as per the Declared Tariff for a given category Declared Tariff as per GST Act could be the highest of the following: Rate for a given date displayed on your hotel reception Rate for a visible date visible on any brochure Rate visible on your website Rate visible on Online Travel Portals Rate of the room on which the relevant booking is made Example: If Declared Tariff for a room is INR 5000 but it is sold after applying a discount at INR 2000, then the applicable GST is 18% and not 12%. If the room is sold at INR 8000 then the applicable GST is 28%. Advice: Set declared tariff/rack Rate keeping it close to the most frequent price range you sell your rooms at and avoid issues during audit / assessment. as defined by Section 9 (1) of the CGST Act read with Notifications 11/ 2017 and 12/ Central Tax (Rate)

13 GST on Packages Composite Supply Concept In the hotel industry a room is considered Principal Supply. Only those ancillary services which are routinely sold and natural bundles along with the room will qualify as Composite Supply Principal Supply (Room) Naturally Bundled services like Plan Meals or Extra Beds Composite Supply Eg: Room sold on MAP plan with one extra bed Refer SECTION 2 (30) OF CGST ACT and SECTION 8 (a) OF THE CGST ACT to know more

14 GST calculation for Composite Supply Step 1 : Find final package Sell Price Step 2 : Determine Room Sell Rate Step 3 : Find applicable GST rate Lets say a package is sold at INR 4500 for 2 adults and 1 child at MAP meal plan. This qualifies as Composite Supply. 1 Extra Bed for INR meals for 3 INR 1800 Room Sell Rate for 2 pax = INR 2000 Room Sell Rate INR 2000 (applicab le 12%) Declared Room Tariff INR 4000 (applicab le Step 4: Create the final quote/voucher/invoice by applying applicable GST rate on Principal Supply + Natural Bundles Rooms Adults Child Total Net Amount Super Deluxe (MAP) % 405 9% 405 Total Gross Amount 5310

15 FAQ on Composite Supply FAQ : If I have sold a room on CP plan for 2 pax at INR 2800 and I have set Breakfast at INR 1000 per person. Also I have set my declared tariff as INR 999. In such a case, my room only price will be INR 800. Will this mean that my tax on the entire invoice will be 0%? Response: Set meal and extra bed rates at a practical level to avoid potential implications from tax authorities under evasion/profiteering. If the room only tariff is coming less than INR 999 and declared tariff for the category is also less than INR 999 then as per the current GST Act 0% tax will be applicable on the entire invoice.

16 GST on Packages Mixed Supply Concept Sometimes customers are offered packages like Adventure Rafting which have inclusions which are not natural bundles of a room. Unnatural bundles can also be defined as items which can be sold independently and are not dependent on one another. Principal Supply (Room) + Natural Bundles Unnatural Bundles like Amusement Park entry or Rafting Mixed Supply eg: Amusement Park Package or Rafting Package When Sold along with these Unnatural Bundles, the package is categorized as Mixed Supply and a specific GST calculation is applied. Refer SECTION 2 (74) OF CGST ACT and SECTION 8 (b) OF THE CGST ACT to know more.

17 GST calculation for Mixed Supply Step 1 : Find Final Package Sell Price Step 2 : Determine the item with the highest GST rate Step 3 : Find applicable GST rate on Room Lets say an Amusement park package is sold at INR 10,000 for 2 adults and 1 child at MAP meal plan and it includes River Rafting for 3 pax. This qualifies as Mixed Supply. Extra Bed : as per Declared Tariff Meals in AC restaurant: 18% Amusement Park : 28% Room : As per declared tariff Amusement Park Applicable GST 28% Declared Room Tariff INR 4000 (applicabl e Step 4: Create the final quote/voucher/invoice by applying applicable GST rate on Mixed Supply Final Package Sell Price

18 FAQs around Mixed Supply If that is the case, should I not sell services which attract a high GST rate? Response: If you bill the high GST services as an Add-On and show it separately in an invoice instead of making it a package, then the high GST services will be billed separately and room composites will be billed separately.

19 Invoice formats under GST GST lays down certain rules for Invoices under Rule 46 of the CGST Rules For example: GSTIN, Name and address of supplier Invoice Number, Date of Issue GSTIN, Name and address of recipient SAC Code of item Tax breakup for items along with GST rate Signature

20 The Customer - OTA Hotel Relationship under GST The Customer belongs to the hotel and not the OTA. OTA is simply a facilitator who is passing on the hotel SELL Rate to the customer and charging a commission from the hotel. OTA commission is an expense item for the hotel and OTA gives an invoice including IGST for its services (or CGST+SGST if OTA and Hotel are in the same state). Hotel is supposed to produce an invoice to the OTA guest at SELL Rate and not NET of COMMISSION rate. This feature has been released today on DJUBO.

21 Some FAQs received before the webinar

22 How am I supposed to handle GST on OTA Invoices? Invoices for OTA bookings are supposed to be created on sell rates which are pushed to the OTAs on the date of creation of invoice for the dates of stay for the specific booking. OTAs are currently simply applying the same GST slab on all kinds of rate plans being pushed by hotels. OTAs are not differentiating between Room Only Rate (EP), Breakfast Included (CP), Half Board (MAP), Full Board (AP), Extra Adult, Extra Child etc while applying the general slab structure on the Total Sell Rates. Some OTAs like Go-MMT have started giving an option to setup Rack Rates on their extranets but not many hotels are aware of it or using it. Other OTAs don t even have this option yet. Whats the solution? Well, DJUBO for one has handled all such scenarios by allowing the OTAs to send us the Sell Rate + GST amount and then recomputing GST as per DJUBO s settings on the DJUBO voucher.

23 FAQs : Do hotels/agents need to charge IGST in their invoices? Supplier / Hotel Invoice IGST is applicable only when the location of supplier and place of supply of service are in different states. So for hotels which are immovable assets, IGST is not applicable on their invoice. Rare services like inter state cab rental provided by a hotel is a possible candidate for IGST appearing on a hotel invoice. OTA Invoice OTAs are service providers to the hotels. They have started sending commission invoices to the hotels which include IGST (or CGST/SGST in some cases). (click here to see samples OTA commission invoice) Offline Agent Invoice Typically Offline agents sell a room directly to guests, keep their commission and pass on the balance amount to the hotel. They do not disclose their sell rate to the hotel. In such cases, the hotel is simply required to generate their regular invoice on the hotel s sell rate to agent. The hotel s invoice to agent will contain only CGST and SGST. The Agent s invoice to guest may contain IGST if the state of delivery of service is different from the state of the travel agent s office.

24 Sample OTA commission invoices IGST an OTA commission invoices

25 FAQs : Can hotels get input credit of IGST? Since for many hotels 50%+ of bookings are already OTA bookings, there it is very important to claim IGST input credit. Since hotels only mention CGST and SGST on their invoice, it is important to note that IGST input credit can also be utilized for discharging the liability of CGST and SGST. Input Credit of To be set-off first against Payment of CGST CGST IGST SGST SGST IGST Maybe set off further against IGST IGST CGST then SGST

26 I am a small guest house am I supposed to register under GST? If you are a business with less than INR 20 lakh revenue then GST registration is not mandatory. Even OTAs don t enforce GST registration for you. You can choose the option to declare that you don t need a registration and they will start sending you bookings again. For example Go-MMT extranet has the option to give this declaration and submit it to start receiving bookings again.

27 How do I find the applicable GST for my add-ons and points of sale items? All item categories are given a specific SAC code and each SAC code has a GST rate predefined. You can find all SAC codes at or Some common SAC codes for hotel industry are: SAC code for Room or Unit accommodation services SAC code for F&B services inside a hotel including room service SAC code for fitness centres/ spa services

28 I am a DJUBO user, how do I enable GST settings for proper invoicing? By switching on the India GST setting under Manage this property > Property settings the following things will get implemented automatically The setup of CGST and SGST rates for Room Tariff will be automatically done as per the slab structure of INR 999/2499/7499 prescribed by the government. By default the GST for all OTA bookings coming via DJUBO will be recomputed from the Sell Rate + GST amount received via API by DJUBO from the OTA servers. Rack Rates will be enabled but the property will need to set Rack Rates manually otherwise Final Sell Rates will always determine the GST slab Meal plans and Extra bed rates will need to be populated by the property otherwise they will be assumed to be zero and the entire package will be assumed as Room Only. PoS menu items will need to be mapped to a GST tax rule created after studying the applicable tariff on each good or service here:

29 How should we handle No Show and Response: Cancellation under GST? If your property has a cancellation or no show charge policy and if you have already received an advance against it, it means you would have already paid GST on it when you issued the confirmation against the booking. Now if the booking is cancelled in the same month then you simply need to cancel the voucher and only the GST on no show / cancellation charge will be applicable as per Composite Supply concept. If the booking is cancelled in a different month then we can claim the credit of extra GST paid.

30 Is GST supposed to be filed against advance received or only invoices after Response: checkout? The liability to pay tax on services shall arise at the time of supply which is earlier of : (1) Date of issue of invoice (2) Date of receipt of payment On DJUBO we have a Booking Database which captures the GST amounts for each booking and a Payments Database which capture the date of each payment received. Your CA can match the two while filing GST.

31 Thank You! Please give your response on a poll which will be on your screen in a minute What would you like us to conduct the next webinar on?