The Council approved a cut in tax rates on rooms with a tariff of Rs 7,500 and above to 18 percent and those with tariff below Rs 7,500 to 12 percent. GST on room tariff below Rs 1,000 has been scrapped.
Share prices of hotel companies rallied 4-15 percent intraday on September 23 after the government slashed corporate tax and GST rates.
Advani Hotels, Chalet Hotels, EIH, EIH Associated Hotels, Hotel Leela, India Tourism, Indian Hotels, Kamat Hotels, Lemon Tree Hotels, Mahindra Holidays, Oriental Hotels, Royal Orchid and Taj GVK Hotels were gainers.
In a surprising and bold move the government announced a reduction in the corporate tax rate from 34 percent to 25.17 percent (inclusive of surcharge and cess) effective FY20 thereby fulfilling its key agenda of implementing the Direct tax Code (DTC). The minimum alternate tax rate also reduced from 18.5 percent to 15 percent.
"The immediate benefit of this reduced tax rate will be seen in increased cash flows to corporate India that will be either be channelized into debt reduction or incremental investments in increasing fresh capacities," Joindre Capital Services said.
According to the brokerage, Taj GVK and EIH are expected to gain the most. "While Indian Hotels' domestic operations will have a positive impact, other players like Wonderla Holidays will also see reduced tax outgo ahead," it said.
In addition, Finance Minister, Nirmala Sitharaman on September 20 also announced several revisions to the goods and services tax (GST) rates following the 37th GST Council meeting, for the promotion of the tourism sector.
The Council approved a cut in tax rates on rooms with a tariff of Rs 7,500 and above to 18 percent and those with tariff below Rs 7,500 to 12 percent. GST on room tariff below Rs 1,000 has been scrapped.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.