Vishal Puri, Co-Founder, Spalba
India’s recent GST 2.0 rationalisation measures have demonstrated the catalytic impact of thoughtful tax reform. Simplified rate structures and improved clarity across sectors such as automobiles and consumer services have helped revive demand, enhance compliance and restore investor confidence.
However, the hospitality and events ecosystem, a critical enabler of tourism, trade and business mobility, continues to operate under a fragmented and layered tax regime that constrains its growth potential, particularly for hotel-hosted conferences, banquets, exhibitions and social events.
At present, hotel accommodation is taxed under multiple GST slabs based on room tariffs. Rooms priced up to ₹7,500 per day attract 5 percent GST without input tax credit, while rooms above this threshold are taxed at 18 percent with input tax credit. In contrast, associated services such as banquet halls, catering and event hosting typically attract 18 percent GST in larger hotels, or 5 percent without input tax credit in non-specified premises.
Adding to this complexity is the treatment of alcoholic beverages, an integral component of many corporate and social events. Alcohol remains outside the GST framework and is subject to high state-level excise duties and VAT. In several key markets, these levies push effective tax rates beyond 25 percent.
The cumulative impact is a significantly inflated cost structure for organised events and premium hospitality services. For corporate clients, industry associations and international organisers, these higher costs directly influence budgeting decisions. In many cases, this results in scaled-down events or a shift to more cost-efficient international destinations.
From an operator’s perspective, the challenge extends beyond pricing. Limited availability of input tax credit across service lines, including proportional reversals on 5 percent supplies under Rules 42 and 43, leads to higher embedded costs and sustained margin pressure. Multiple compliance requirements and inconsistencies across state-level policies further increase operational complexity, particularly for large-format or multi-city events.
This inefficient tax structure ultimately impacts both service providers and end consumers, suppressing demand at a time when the sector is otherwise well positioned for expansion.
A rationalised and balanced tax framework, especially for events, catering and beverage services within hotels, can act as a strong catalyst for growth. Simplified rates and improved credit flow would lower effective costs, encourage formalisation and unlock private investment in banquet, convention and MICE infrastructure.
The potential upside is substantial. It includes increased demand for domestic and destination events, higher room occupancy and food and beverage revenues, expanded employment across hospitality and allied services, and a stronger positioning for India as a globally competitive MICE destination.
The success of GST 2.0 reforms in other consumer-driven sectors offers a clear lesson. Well-designed tax rationalisation leads to higher volumes, stronger compliance and more sustainable revenue generation.
Applying the same reform mindset to hospitality and events would significantly improve ease of doing business and enhance revenue buoyancy by expanding the tax base through growth rather than higher rates. As India seeks to position tourism and services as long-term economic drivers, strategic tax reform in hospitality has become imperative rather than optional.
