India Cutting Outrageously High Hotel Taxes

Filed Under: Hotels

Some hotel markets are known for having incredibly high taxes and fees. In some cases this is purely “legitimate” taxes, while in some cases they package taxes and a service charge for employees under the same amount, even though those are very different things.

For example, when I think of booking a hotel in Mexico, the first thing that comes to mind is the 34% in fees that go on top of the room rate — this includes a 16% VAT, 3% state tax, and 15% service charge. Mexico is a great market for redeeming points, since you don’t pay those fees when you redeem points.

India’s High Hotel Taxes

Another market known for high hotel taxes is India. Historically hotel taxes in India are as follows:

  • 18% on rates of under 7,500 INR (less than ~106USD)
  • 28% on rates of over 7,500 INR (more than ~106USD)

India Lowers Hotel Taxes

As of October 1, 2019, India will be reducing the taxes on hotel stays, as follows:

  • 0% on rates of under 1,000 INR (less than ~14USD)
  • 12% on rates between 1,000 and 7,500 INR (~14-106USD)
  • 18% on rates of over 7,500 INR (more than ~106USD)

Those are some significant decreases in fees, which is pretty exciting. The 0% tax means that many people in budget accommodations won’t have to pay any taxes when staying at hotels, while even at high end hotels taxes are decreasing by 10%, which is significant.

I do find it odd that the tax is based on the total amount rather than tiered. In other words, a hotel costing 7,499INR would end up costing significantly less than a hotel costing 7,501INR, since there’s such a huge spread on the tax for the entire amount.

Hotels are of course applauding this change. While I doubt rates will fully increase to correspond to the reduction in taxes, I’d be surprised if we don’t at least see hotel rates increase a bit as a result of this.

Bottom Line

A 28% tax on hotel stays sure is steep, especially when you consider that it doesn’t even include any sort of service charge. At 18% taxes are still on the high side, though we’ll take a 10% drop in those fees.

Interestingly at the same time India is increasing the taxes on caffeinated beverages from 18% to 28%. So out with the hot beverages, in with the hotels, it seems.

Comments
  1. Why are these taxes considered high? What about all the stadiums funded by tourists? I remember paying almost 50% over the actual car rental rate in Houston many years ago thanks to fees & taxes.

  2. @Vijay Most of the taxes & fees you encountered in Houston are local to them. The Indian hotel taxes being reduced are uniform across the country.

  3. In many european countries VAT is charged at 20% (or more) and is has to be part of the room rate. This is a lot more honest than adding the tax on after, not least because, as a value added tax the VAT paid by the hotel is net of any VAT the hotel pays to suppliers. I’m not sure if the situation is the same in Mexico but it’s a lot more honest to include the VAT as part of the room rate.

    Of course the question for the Indian people is wether this was a significant source of revenue for the government and where that revenue (or cuts in public services) is going to come from instead.

  4. “Outrageously High Hotel Taxes”?? give me a break… have you stayed in a Houston hotel?

    Also, India has some of the lowest rates for top tier hotels …I don’t mind paying the taxes given the overall value for money

  5. Never found the taxes to be concerning during hotel stays in India.

    Glad to see that taxes are increasing on carbonated beverages, not just caffeinated. Maybe the States should follow.

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