Odisha's Hospitality Industry Calls for GST Simplification in Upcoming Budget
The hospitality sector in Odisha is strongly advocating for a uniform 5% Goods and Services Tax (GST) on mid-segment hotel rooms and meals in the Union Budget for 2026–27. Finance Minister Nirmala Sitharaman is set to present the budget on Sunday, and industry stakeholders are hopeful for this long-pending reform.
Current GST Structure Creates Challenges
J K Mohanty, Chairman of the Hotel and Restaurant Association of Odisha, highlighted the existing complexities. Under the current GST slab system:
- Hotel rooms priced up to Rs 7,500 attract a 5% GST rate.
- Rooms costing above Rs 7,500 are taxed at a significantly higher 18%.
- Similarly, meals at standalone restaurants are charged 5% GST, but when served through room service, the rate jumps to 18%.
Mohanty emphasized that this dual GST system, implemented nearly a decade ago, has been unpopular with both the industry and guests. He stated, "A uniform GST slab is a long-pending demand of the hospitality sector." He further noted that the current structure acts as a major obstacle to attracting foreign tourists, hindering the sector's growth potential.
Impact on Mid-Segment Hotels and Tourism
Hoteliers report that approximately 75% of hotels fall into the mid-segment category. With rising inflation, many of these establishments have been pushed into the 18% GST bracket, increasing costs for consumers. Industry representatives argue that simplifying the GST structure to a uniform 5% across all hotel rooms and meal plan categories would:
- Make travel and accommodation more affordable for tourists.
- Boost business for the hospitality sector by encouraging more domestic and international visits.
- Enhance competitiveness in the global tourism market.
Rajkishore Parida, a prominent hotelier, echoed these sentiments, calling for a reduction in GST rates. He said, "GST rates on hospitality should be slashed. Rooms with tariffs of Rs 7,500 and above attract an 18% GST, which is still high in this competitive scenario. We are expecting a uniform 5% GST across all hotel categories and room tariffs. Restaurants, banquets, and food and beverage outlets should also be taxed at 5% only."
Broader Implications for the Economy
The push for a uniform 5% GST is not just about tax simplification; it reflects broader economic concerns. The hospitality sector is a key driver of employment and revenue in Odisha, particularly in cities like Bhubaneswar. By making services more affordable, this change could stimulate tourism, create jobs, and contribute to the state's economic development. As the budget presentation approaches, industry leaders remain optimistic that their demands will be addressed, paving the way for a more streamlined and growth-friendly tax environment.
