An Empirical Analysis of GST’s Effect on the Hotel Sector in India

Abstract

The implementation of the Goods and Services Tax (GST) in India marked a significant shift in the nation’s indirect tax regime, aiming to streamline taxation, reduce cascading effects, and promote economic growth. This study provides an empirical analysis of GST’s impact on the hotel sector in India, examining the legal and constitutional frameworks that underpin this transformative reform. The GST Act, enacted as the Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act, and State Goods and Services Tax (SGST) Act, was designed to create a unified tax system across the country, replacing multiple indirect taxes levied by central and state governments. The constitutional basis for GST derives from Articles 246A and 279A of the Indian Constitution, which empower Parliament and state legislatures to levy and regulate GST jointly, establishing a cooperative federalism model. The empirical analysis assesses the sector-specific implications, including compliance costs, pricing strategies, and competitiveness, by analyzing data from hotel industry reports, government publications, and stakeholder surveys. The study also explores legal challenges and interpretations related to GST’s applicability to hotel services, including the classification of accommodation services and the place of supply provisions. Findings indicate that GST has led to increased transparency, simplified tax procedures, and a more level playing field among hotel operators. However, it has also posed challenges such as transitional compliance costs and ambiguity in certain service classifications. The paper concludes that the legal and constitutional frameworks have played a pivotal role in shaping the operational landscape of the hotel sector post-GST, fostering a more integrated and efficient tax environment. Overall, the empirical evidence suggests that GST’s reforms have had a mixed but largely positive impact on the hotel industry, contributing to sectoral growth and aligning with India’s broader economic objectives of fiscal consolidation and ease of doing business.