The word ‘Luxury’, as per the Luxury Tax Act, has been defined as a good or service that aims at offering comfort to an individual paying for it. The implementation of the Goods and Services Tax (GST) has streamlined the taxation system by riding the previous tax regime of repeatedly levying the same indirect taxes at every step across the supply chain.
The new taxation system, which has unified the calculation of taxes, has categorised Luxury Tax under the highest tax bracket of 28% for luxury goods and services priced over Rs. 7,500, 18% for those priced between Rs. 2,500 to Rs. 7,500, 12% for those priced between Rs. 1,000 to Rs. 2,500. Luxury Tax is not applicable on products and services priced below Rs. 1,000.
The new taxation system clearly defines the products and services that are classified under the luxury category, namely hotels, restaurants, health clubs, spas, beauty parlours, swimming pool, etc.
The implementation of GST clearly defines the goods and services that are classified under the ‘luxury items’ category. It has also laid down the tax slab rate to be levied on such goods and services as per their prices, as mentioned in the table below. There are also other parameters that decide the tax slab which will be applicable. For instance, the annual turnover of the business providing luxury goods and services, amenities offered like air-conditioned or non-air-conditioned, among other factors.
Here is a list of approximate Luxury Tax rates levied by hotels and restaurants. However, these rates vary between states and Union Territories:
| Room Tariff per Night | Luxury Tax Rate |
|---|---|
| < Rs. 1,000 | No tax applicable |
| > Rs. 1,000 but < Rs. 2,500 | 12% |
| > Rs. 2,500 but < Rs. 7,500 | 18% |
| >Rs. 7,500 | 28% |
Below are the Luxury Tax rates levied by hotels and restaurants in India, based on certain parameters:
The following are the services provided by hotels and restaurants that attract Luxury Tax:
The implementation of Goods and Services Tax (GST) has overhauled and revamped the previous indirect tax regime, eliminating the multiple taxation system. It has also made the taxation system systematic and seamless by ridding the process of filing commercial taxes, including luxury tax, every month or on a quarterly basis. Luxury Tax in India has to be paid by the last date of the month succeeding the assessment month, streamlining and organising the taxation process.
The new taxation system clearly defines the products and services that are classified under the luxury category, namely hotels, restaurants, health clubs, spas, beauty parlours, swimming pool, etc.
Commercial Taxes Department or the Excise Department is generally authorised to preside over and oversee the collection of Luxury Tax in all the states in India. These departments are further categorised into different departments in every state to execute the process of imposition and collection of Luxury Tax – VAT, Service Tax, Entertainment Tax, in an organised way.
These departments have improvised on their functionalities in alignment to their set responsibilities. The departments in every state have their independent websites and other channels through which residents of that state can access the necessary form and register their business or themselves. The registration process enables the individual or business owner to pay luxury taxes as applicable to them.
Post the implementation of GST, several indirect taxes has been unified, simplifying the taxation process. Unlike the process of filing commercial taxes, including luxury taxes, every month or on a quarterly basis, GST has standardised the taxation process. The procedure and dates of filing GST is the same for all industries throughout India. Luxury Tax in India has to be paid by the last date of the month succeeding the assessment month.
Ans: After the implementation of the Goods and Services Tax (GST), Luxury Tax on luxury goods and services are taxed at 18%.
Ans: After the implementation of the Goods and Services Tax (GST), Luxury Tax on luxury goods and services are taxed at 12%.
Ans: After the implementation of the Goods and Services Tax (GST), Luxury Tax on luxury products and services are taxed at 28%.
Ans: No tax is applicable on products and services priced below Rs. 1,000.
Ans: Below are the services on which Luxury Tax becomes applicable after the implementation of the Goods and Services Tax:
Ans: Restaurants with a turnover of less than Rs. 50 lakhs will levy a luxury tax of 5%.
Ans: The Luxury Tax in India levied by non-AC restaurants, as applicable under the GST Act, is 12%.
Ans: The rate for Luxury Tax in India levied by AC restaurants is 18%.
Ans: As per the GST taxation system, the Luxury Tax in India levied by 5-star restaurants is 28%.
