VAT Impact on Hospitality Sector

VAT Impact on Hospitality Sector

VAT Impact on Hospitality Sector


The ‘Gulf Cooperation Council’ (GCC) states are setting themselves up ahead for the introduction of ‘Value Added Tax’ (VAT) as earliest as upcoming New Year i.e. with effect from 1st January 2018. According to PTI Sources, it has been revealed that the standard rate of 5% in Hospitality segment will be imposed.

Hospitality Industry is a multibillion-dollar industry as it includes hotel accommodation services, restaurant meals and entertainment activities.

The proposed VAT will be charged on most goods and services at a standard rate of 5% though exempting certain health and education segment. It is expected that every individual in UAE will pay VAT when they  buy  goods and services. The legislature of UAE making it as a positive stride as it stands out among other measures taken by the administration, they are likewise hoping to produce high revenue in the coming year as they may create Dh12 billion revenue in the very next financial year which furthermore may expand up to Dh20 billion by the year 2019.

Over the years GCC nations have seen  many vacationers which boosted their tourism industry and acted as a catalyst to their overall economy, yet the imposition of VAT will impact the industry and tourist consumption, spending and overall behavior. In spite of the fact that six states of GCC mutually consented to apply VAT in their framework and it is assumed that UAE government will be generating $25 billion(Dh91.8 billion) consistently.

According to the Business analysts, it is one of the most intense and astute advances any government can exhibit. Sajan Alex who is the vice-president of Tablezfood company said the same and added: "it is extremely bold of UAE government to apply VAT in the country". VAT will be transmitted to customers and VAT is an extra cost for the purchasers. Through VAT, it is conceivable to enhance the financial states of the nations as it is directly proportional to GDP growth, as it might ease up the business processes thus encouraging the entrepreneurship culture among the community thus enhancing the expectations of everyday comforts of individuals and provide better fruitful opportunities for the youth of the nation.

The initial impression from hospitality professionals and experts in the nation is that they feel the new  enactment ‘VAT’ will surely have a positive impact on their businesses, its pricing and operations. Notwithstanding, at 5%, it's still significantly lower than other countries including U.K that imposed taxes in the bracket of as high as 20%.

Tourism is one of the division which contributes significant in the GDP of UAE but after the implementation of the new tax laws, people are energetically holding up to get detailed notifications from the government authorities which covers exception rundown of goods and services and furthermore book keepings procedures. So it is concluded that government of UAE is anticipating that VAT will give positive results in the hospitality segment. 

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