Japanese, Korean industry demand abolition of GST on service apartments

NEW DELHI: The Japanese, Korean, and other Asian business communities have urged the Indian government to abolish goods and services tax (GST) they are paying for staying in service apartments in India.

At present, the service apartment owners charge the room occupants GST at the rate of 12 percent at par with hotels, over and above the room tariffs.

The Asian business communities have contended that the service apartments are hired by the small, and medium and micro industries entrepreneurs or the middle management cadre executives as this option is much cost-effective when compared with hotels.

Also the service apartments are hired for longer durations from one month to 11 months, which as good as renting a home.

“When property owners rent out homes to occupants, the GST does not apply in this case and the occupants are charged only the rental, and are slapped GST. The same is the case with service apartments. The occupants here hire rooms attached with kitchen for longer duration but they are supposed to pay 12 percent GST too as is the case in hotels,” said Inder Yadav, Managing Director, AJU Group of Japanese Hotels.

AJU group specializes in offering longer duration stays to Japanese executives in their service apartments in many cities in India including Gurugram and Ahmadabad where the concentration of Japanese companies is high.

“Government should not treat service apartments at par with hotels which are hired for a few days and has different format. GST should be abolished in this case as the occupants in this case of cost-conscious and that’s why they chose to stay in service apartments and for longer periods unlike hotels,” said Kenji Sugino, Secretary-General, Japan Chamber of Commerce and Industry in India (JCCII) that has over 450 Japanese companies as members in Delhi NCR towns.

Unlike their counterparts from European countries, the Japanese and Korean business executives and entrepreneurs are generally cost-conscious and prefer to stay in budget accommodations and for longer periods when visiting India. The total number of Japanese companies in India is about 1500.

Euy Don Park, Chairman, Presidential Group of Korean Associations in India also is of the view that the government should not slap 12 percent GST on service apartments.

“Twelve percent is a significant amount which our executives have to shelve out while staying in service apartments, and the government should reconsider its decision of charging it from the occupants,” said Park.

South Korean companies in India are about 700 and the number is increasing every month as the Korean industry has serious plans to hike investment in India in time to come, and so is the number of Koreans visiting and staying here.

Rahul Sharma, Chairman, India-Japan Business Promotion Council of Associated Chambers of Commerce and Industry of India (ASSOCHAM) too has supported the demand for the abolition of 12 percent GST from service apartments.

“Staying in service apartments for the Japanse and Korean executives is like living in rented homes, and they should be subjected to paying the GST at par with hotels, and be treated as tenants,” said Sharma.

But he has a piece of advice for the serviced apartment operators.

“These service apartment owners should stop using the name hotel for their properties as by doing so they are attracting GST liability at par with hotels even though they are not hotels,” said Sharma.