Mangaluru: Upset at the 18% GST slab on homestays, those involved in the business have written to the GST Council Secretariat not to tax homestays or reduce the rate chargeable to the bare minimum of about 3% to 5%.

City-based Suresh Mathias, a pioneer in this business, said, “The GST rule suggests that all homestays which have a turnover of Rs 20 lakh per annum and above should register with the GST Council. There cannot be any homestay which makes less than Rs 20 lakh per year. If a firm does so, it only means the owner of such a firm has been collecting money in cash by not recording the entire turnover.”

The government has been encouraging homestays as there is a dearth of 1.9 lakh rooms in the country. Hence, before the introduction of GST, a service tax of 8% was levied on homestays. This was applicable only on accommodation while food and other services were exempted. Mathias said, “If a homestay cost Rs 2,000 per day excluding food, this meant that service tax was applicable only on Rs 2,000. This was also exempt from VAT and sales tax. However, GST is applicable on the entire bill, including food and other services. It means that if a homestay charges Rs 4,000 inclusive of all services, 18% GST is charged on Rs 4,000. This is certainly a loss-making equation.”

The government fixed 18% GST on homestays as well as resorts. However, homestays are cheaper and devoid of resort-like facilities such as swimming pools, spas and liquor licences. Uday Kumar, deputy director of tourism, Dakshina Kannada, too endorsed the view and said homestays were just blooming in the district. Hence, the 18% GST slab was likely to hamper their prospects. “A lower tax slab would have certainly help boost the business,” he said. “By the time the government takes necessary measures, enough damage would have been done from which, returning to normalcy would be difficult,” said Mathias.