After issuing notices to hotels across the country for allegedly underpaying goods and services tax (GST) on restaurant services, the revenue department has now widened its scrutiny by seeking information from online travel platforms.
Image used for representational purpose only. Photograph: Amit Dave/Reuters
The aim, according to sources, is to see if hotels are correctly declaring the taxable value of bookings made through these portals and whether GST should be paid on the amount paid by customers through these platforms or only on the amount received by hotels after deducting the platform’s commission.
Sources said officers in charge of central GST (CGST) had written to the platforms, seeking the booking-level data, including customer payments, commissions retained, and the amount remitted to hotels.
The department is analysing whether hotels have underpaid tax by leaving out the commission from their turnover.
An email, seeking comments, sent to the finance ministry remained unanswered till the time of going to press.
In one case, the anti-evasion wing of the Pune unit of the GST collection structure sought booking details from an online travel intermediary for a Maharashtra-based hotel.
The letter, reviewed by Business Standard, asked for an explanation on the difference between the amount paid by guests and that remitted to the hotel.
In its written reply, the intermediary said the booking amount shown on the customer’s voucher included its commission, tax, and other charges.
After deducting the commission and statutory deductions such as tax deducted at source (TDS) and tax collected at source (TCS), the remaining amount is transferred to the hotel as settlement for the stay.
The firm said GST on its own commission was paid separately.
The tax department has also asked for similar booking data for earlier years, starting from 2019-20, to check if the same valuation method was used, according to sources.
Tax experts say the issue arises because these transactions involve three parties — the hotel, the online travel agent (OTA), and the customer.
For example, if a guest pays Rs 8,500 for a hotel room through an OTA, and the OTA keeps Rs 1,500 as commission before paying Rs 7,000 to the hotel, the question is whether GST should be on Rs 8,500 or Rs 7,000.
“The law is clear that GST applies only on the amount received by the hotel for its service,” said Abhishek A Rastogi, founder, Rastogi Chambers.
“If tax is charged on the total, part of which is already taxed as the OTA’s commission, it will lead to double taxation.”
“Section 15 of the Central GST Act says the value of supply is the amount actually received or payable for the service.
“So, the hotel’s consideration is the amount it gets from the OTA, not what the customer pays in total,” Rastogi added.
The rate structure also adds confusion. Rooms priced below Rs 7,500 attract 5 per cent GST, while those above Rs 7,500 attract 18 per cent.
If the department counts the customer payment, the same room may fall into a higher tax slab even though the hotel earns less.
Experts say the government should clarify how the value of hotel bookings should be calculated when online intermediaries are involved.
“Without clarity, both hotels and travel portals could end up being taxed on the same value, creating legal disputes and hurting ease of doing business,” Rastogi stated.
