Welcome to another week, chief! We're a day ahead of schedule because tomorrow is Holi! Wish you a very happy Holi!

In today’s edition — The hotel industry has urged the government to amend the confusing GST charged on food at hotel restaurants based on the room rate; Vanuatu pulls the plug on Lalit Modi’s citizenship after global pressure.

The GST Confusion on Hotel Dining

Let’s assume you had a gruelling week and you’re thinking of a quick one-day break over the weekend. You visit a booking app and choose a hotel room that costs ₹7,499 a night. It fits your budget, so you go ahead with the booking. After checking in, you have a sumptuous meal at the hotel’s restaurant and get billed with a 5% GST. Perfect. 

The next day, let’s just assume once again, you want to extend the stay by a day. You visit the same app, but you notice that the rate for the same room has gone up by ₹2 to ₹7,501. You don’t feel the pinch. After all, it’s just a couple of bucks, so you book it again. You revisit the same restaurant for your lunch, but this time your meal is taxed at 18%.

That’s unfair, you protest. When you complain about it, you’re told that’s how the GST on hotel food and beverages (F&B) services works.

But this “irrationality” may change soon because the first step to alter this tax structure has begun. The Federation of Hotel & Restaurant Associations of India (FHRAI) has approached the government with the same question: ‘Why should the dinner tax rate be linked to the price of the bed?’ 

The FHRAI has requested the authorities to adopt a more rational approach where restaurants of all categories—from 5-star to a roadside eatery—get to pick whether they want 5% without input-tax credit (ITC) or an 18% with ITC.

Now, the question is whether the government will pay heed to the request or continue playing a game of “guess the tax” with every meal. 

Let’s understand it better:

As of today, if a hotel room costs ₹7,500 or more a night, dining at its in-house restaurants attracts 18% GST. On the other hand, if the room rate is less than ₹7,500, the restaurant charges only a 5% GST. 

The FHRAI believes this structure is unfair and impractical, and therefore they have requested the government to decouple F&B taxation from room tariffs and allow hotel restaurants to choose between 5% and 18% GST.

The threshold of ₹7,500 was fixed in 2017 when GST came into existence. The FHRAI argues that even if the government wants to maintain the status quo, the limit of ₹7,500 is now outdated because of inflation, and therefore it should be raised to at least ₹12,500. 

FHRAI vice-president Pradeep Shetty recently told PTI that the current tax structure is arbitrary and it makes little sense for hotels and their guests who have to pay extra on food for reasons that have nothing to do with what’s actually on their plate.

From a hotel’s point of view, the situation is trickier. Hotels that choose to cross the ₹7,500 threshold either absorb the additional tax or pass it on to guests, making dining more expensive. 

So far, we do not know what will happen to the proposal sent to the government. But with the hospitality industry making persuasive arguments in favour of a less complex tax structure, pressure is mounting for change. Until then, your dinner cost at a hotel restaurant will continue to be tied to the room price you have paid.

Tax Haven With a Conscience

One thing most billionaires have in common is a Plan B. And it usually works, unless you’re Lalit Modi, the man behind the Indian Premier League, wanted in India for money laundering, creative bookkeeping, and being a fugitive awaiting extradition.

So, here’s what happened: Lalit Modi recently got the citizenship of Vanuatu, a South Pacific archipelago famous for its pristine beaches and favourable tax policies. 

But just when he thought everything was going well, the island country unceremoniously revoked his passport, saying they don’t want to promote themselves as a favourite destination for people on the lam.

If you have heard of Vanuatu before, you’re a pro. But if you’re hearing the name Vanuatu for the first time, you’re not alone. It’s a small country with a rather accommodating passport programme if  you’re willing to pay for it. The cost? $130,000 (₹1.08 crore) only. Fascinating, right? For that amount, you could get yourself a new identity and a permanent spot, if you will, on a sun-kissed beach.

But that’s not all. There’s a reason this ‘shady paradise’ is a favourite refuge for runners: it has no income tax, no capital gains tax, no inheritance tax, and absolutely no pesky withholding tax. A dreamland, in short.

But as fate would have it, this utopia caught the attention of international regulators who put it on a “grey list” for being way too relaxed about financial transparency. As a result, it had to tighten its banking regulations. But despite developing a moral compass, it has not been able to shake off the bad reputation.

Anyway, back to Lalit Modi.

For now, the tropical tax haven has made it clear to the embattled billionaire that he may need to find another sanctuary that is more liberal with background checks. 

Let’s see if Lalit Modi has a Plan C as well.

₹1,950,000,000,000

That’s ₹1.95 trillion, which Central GST officers have detected as tax evasion in 25,397 cases in the April-January period of the current fiscal. As per the data shared in the Lok Sabha this week, the total number of GST evasion cases detected by central government officers in the last five years was 86,711 and the total detection was over ₹6.79 trillion. In the current fiscal (up to Jan 2025), the total number of evasion cases detected stood at 25,397, with a total detection amount of ₹1,94,938 crore.

— Court call. The Gauhati high court has held that fruit pulp and juice-based carbonated drinks are not just “water or carbonated water alone”, reports TOI. That means they attract a lower GST— falling under the lower 12% GST slab instead of the steep 28% demanded by tax authorities. The court order has effectively fizzed out the GST demand imposed on X’SS Beverage — a manufacturer and seller of a range of carbonated juice drinks. While the GST authorities contended that since the beverages contained carbonated water, they should be taxed at the higher rate which is applicable to soft drinks..

— New CFO. Sterling and Wilson Renewable Energy said that its board has approved the appointment of Ajit Pratap Singh as a chief financial officer with effect from March 24, 2025, reports Capital Market. Singh, a management accountant and a member of several professional bodies,  has previously worked with companies such as Transrail Lighting, OPG Power Generation, and Vedanta Aluminium, and JSW Bengal Steel. Furthermore, Sandeep Mathew will cease to be the interim CFO effective on March 23, 2025, and will continue in his role as head of investor relations.

— New Deal. Reliance Jio said on Wednesday it signed a deal with Elon Musk's SpaceX to bring Starlink's internet services to India, a day after rival Bharti Airtel, opens new tab inked a similar pact, reports Reuters. Both deals are conditional upon Starlink obtaining government approval to begin operations in the country. Jio Platforms, which will offer Starlink equipment in its retail outlets and online stores, will also provide installation support for the devices.

— Hasty Retreat. US President Donald Trump dialed back his latest trade-war threat against Canada hours after making it, while downplaying the risk of a tariff-led recession that’s sent US markets into a nosedive, reports Bloomberg. Trump’s roller-coaster day saw him threaten to double duties on Canadian steel and aluminum to 50% after Ontario announced plans to place a surcharge on electricity sent to the US, only to retreat back to plans for his previously announced 25% rate after the provincial government backed down. .

ICYMI: GST Blitzkrieg: Notices Fly as Deadline Looms

Missed last week's update? The GST deadline rush is heating up as multiple companies face hefty tax demands, potentially sparking legal battles as they contest the notices.

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