Raisoni Business School

Project Synopsis on

“Analytical Study of Impact of

Good and Services Tax on Hotel
Industry (With special reference
to Indian Hotels Company
Limited)”

Submitted for

Bachelors in Business Administration Course

Specialization - Finance

For the Academic year 2020-21

Submitted by: Anushi Jain

Guided by: Dr Jasvinder Kaur
Introduction

Goods and Services Tax (GST) is a non-discriminatory indirect tax applied to

the supply of goods and services in India implemented on 1st July 2017. By
definition “Goods and services tax” means any tax on supply of goods, or
services or both except taxes on the supply of alcoholic liquor for human
consumption.

The Constitution Amendment Bill for Goods and Services Tax (GST) was
approved by The President of India on 8 September 2016, post the bill's
passage in the Indian parliament and its acceptance by more than 50% of
state legislatures. This law will supersede all indirect taxes applied on goods
and services by the central government and state government and
implement GST by July 2017. The implementation of GST will have a
far-reaching impact on almost all aspects of the business operations in India.
More than 140 countries had adopted some form of GST, India had long been
a jutting exception. GST is a value-added tax imposed at all points in the
supply chain, with extension allowed for any tax paid on input procured for
use in producing the supply. It is applied to both goods and services in a
broad manner, with exemptions limited to a minimum.

It was asserted that the GST will be imposed concurrently by the central
government (CGST) and the state government (SGST), in light of the federal
structure of India. The base and other fundamental design characteristics
would be the same between CGST and SGSTs for different states. The
inter-state stocks within India draw an integrated GST (IGST), which is the
aggregate of CGST and the SGST of the destination state.

Its impact has been seen across all sectors of the Indian economy. The Hotel
industry, like every other sector in the Indian economy, was subject to pay
multiple taxes (VAT, luxury tax, and service tax) under the previous VAT
regime.
A hotel where the room tariff exceeded INR 1,000, was liable for service tax at
15 per cent. An abatement of 40% was allowed on the tariff value, thus
bringing the effective rate of service tax down to 9%. The Value Added Tax
(ranging between 12 per cent to 14.5 per cent) and luxury tax, would apply on
top of this. However, for restaurants, there was 60% abatement which meant

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that the service tax was charged at an effective rate of 6% on the F&B bills,
apart from VAT (12 per cent to 14.5%). Bills for bundled services like social
functions (seminars, marriage etc.), were taxed with an abatement of 30%.
The cascading effect of the VAT regime where the end consumer paid a tax
on tax, increases the end cost. Hoteliers and hospitality businesses did not get
any input tax credit on the taxes they paid, as central taxes like service tax,
could not be set off against state taxes (VAT) and vice-versa.
Specialists discerned that the implementation of GST benefited the sector by
reducing costs for customers, harmonizing taxes, and reducing business
transaction costs, but it has its own set of challenges.

This project will focus on and study the financial impact of GST on the Indian
Hotel industry based on the trends displayed by the Indian Hotels Company
Limited.

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Industry Profile

The hotel industry is the section of the hospitality and service industry that
deals with guest accommodation or lodgings. By most definitions, the hotel
industry refers not only to hotels but also to many other forms of overnight
accommodation, including hostels, motels, inns and guest houses. However,
it does not usually include long-term or permanent forms of accommodation.
Due to the nature of hotel services, it is closely associated with the travel and
tourism industry.

The primary purpose of hotels is to provide travellers with shelter, food,

refreshment, and similar services and goods, offering on commercial basis
things that are customarily furnished within households but unavailable to
people on a journey away from home. Historically hotels have also taken on
many other functions, serving as business exchanges, centres of society,
places of public assembly and deliberation, decorative showcases, political
headquarters, vacation spots, and permanent residences. The hotel as an
institution, and hotels as an industry, transformed travel in America, hastened
the settlement of the continent and extended the influence of urban culture.

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Company Profile

The Indian Hotels Company Limited (IHCL) is a TATA enterprise. It has set
numerous benchmarks in the Hospitality and Hotel industries. It has written a
majority of the history of the Hotel Industry in India and aims to write the
future with the current vision ‘Unlocking Tomorrow’.

Along with its subsidiaries bring together a group of brands and businesses
that offer a fusion of warm Indian hospitality and world-class service. These
include Taj – the hallmark of iconic hospitality, SeleQtions, a named collection
of hotels, Vivanta, sophisticated upscale hotels and Ginger which is
revolutionizing the lean luxe segment.

Incorporated by the founder of the Tata Group, Jamsetji Tata in the year 1899,
the Company opened its first hotel - The Taj Mahal Palace, in Bombay in 1903.
IHCL has a portfolio of 196 hotels including 40 under development globally
across 4 continents, 12 countries and over 80 locations.

The Indian Hotels Company Limited (IHCL) is South Asia’s largest hospitality
company by market capitalization. It is primarily listed on the BSE and NSE.

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The Company has a state of art in-house share registry that is registered as a
Category 'I' Registrar with SEBI. It has over 1,70,000 members. As of date,
approximately 98% of the Equity Share Capital of the Company has been
dematerialized. All correspondence and grievance received from
shareholders are responded to within stipulated time. All valid transfers are
processed within a week of receipt. All Demat requests are processed within
15 days of receipt. All the financial results are promptly reported to the Stock
exchange(s) and published in leading newspapers. The results are also
simultaneously uploaded on the Company's web

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Aims and Objectives

The Aim of this project is to understand GST and its impacts on the economy
with respect to the Indian Hotel Industry and IHCL.

The Objectives of this project are -

● To understand the pros and cons of GST on IHCL
● To analyse and compare the financial fluctuations pre and post the
implementation of GST

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Research Methodology
Research is often defined as a systematic analysis with set objectives and
collecting supervised data and observations that may lead to the
development of generalization of principles or theories resulting in prediction
and possibly ultimate control of events.

Research has been defined by various authors in different ways. Usually,

research is said to begin with a question or a problem. The purpose of the
research is to find solutions through the application of systematic and
scientific methods. Thus research is a systematic approach to purposeful
investigation.

The methodology is often used in a narrow sense to refer to methods,

technology or tools employed for the collection of data as well as it’s
processing. This is also used to designate data collected to arrive at the
conclusion.

Research methodology reiterates what the best course of action would’ve

been. Giving solutions for the major questions while researching on what,
when, why, how and where and analysing data to produce the conclusion. For
systematic research scientific approach is necessary. It is, therefore, essential
to follow a systematic methodology to arrive at a proper conclusion.

The procedures involved in the concept of research methodology are:-

1. Selection of subject.
2. Selection of title dissertation.
3. Collection of data.
4. Reliability of data.
5. Analysis of data.
6. Reporting.

Research is mainly of two types

1. Primary research is new research, based on newly collected data.
2. Secondary research makes use of information previously researched
for other purposes and publicly available. This is also known as 'desk
research’.

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The research in this project will be secondary research based on data
published by the company in reference primarily. For the analytical study, the
data is collected from the company website & annual reports, renowned
online sources in the sector and news articles. The base will be the annual
reports of IHCL & subsidiaries from the past 5 years which provide a detailed
report on every aspect of the company including financial analysis based on
various formulas and comparisons made based on the then-current state of
the market.

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Bibliography

Reports -
https://drive.google.com/drive/folders/1uq_mZm4-TauRHP29Yc5eNwZ25jSmk
WGR?usp=sharing

Websites -

1. http://www.gstcouncil.gov.in/
2. http://www.cleartax.com
3. https://www.ihcltata.com/
4. https://www.ihcltata.com/investors/
5. https://www.encyclopedia.com/

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Declaration

I ANUSHI JAIN student of BBA final year(finance) for the session 2020-2021
studying at RAISONI BUSINESS SCHOOL, NAGPUR, declare that the synopsis
work entitled “Analytical Study Of The Impact Of Goods And Services Tax
On The Hotel Industry (With special reference to IHCL)” was carried by me
in partial fulfilment of Bachelor of Business Administration program under
Rashtrasant Tukdoji Maharaj Nagpur University.

This synopsis was undertaken as a part of the academic curriculum and it has
no commercial interest and motive. It is my original work. It is not submitted
to any other organization for any other purpose.

Student Name Supervisor

Anushi Jain Dr Jasvinder Kaur

Date of Submission - 10th March 2021

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