Save on GST up to 13% of wedding cost by planning wisely: Here's how Expenses made on wedding such as decor, hiring a venue, catering etc. are all impacted by Goods and Services Tax. However, knowing the tax rules can help you save GST on wedding expenses accordingly. Read on to know the rules and save money on your wedding
Siddharth Surana
Director, RSM India
Understanding the incidence of GST in wedding expenditure can significantly help you save on the amount you spend.
GST on major wedding elements
GST impacts all the essential expenditure on a wedding, be it hiring the venue, décor, flight bookings, hotel bookings, photography etc. Given below are the general GST rates applicable on the major elements of expenditure on a typical Indian wedding.
GST on different wedding expenditure elements
Wedding expenditure Elements
Applicable GST rate
Hiring of Venue
5% or 18% depending on the nature of venue and whether catering is included or not
Outdoor Catering (Food and Beverage, excluding alcohol)
This is typically 5%. For hotels having a room tariff greater than Rs 7500 per night, the rate would be 18% for catering services if part of the venue.
Air Travel
5% for economy class and 12% for other than economy class.
Accommodation
This is typically 12%. For any premises having room tariff greater than Rs 7500 per room night, the rate is 18%.
Wedding apparel
The rate is 12% for articles whose sale value exceeds Rs 1,000 and 5% for those below Rs 1000.
Wedding planning services
18%
Event photography and event videography services
18%
Hairdressing and barber services
18%
Face and beauty treatment services, manicure and pedicure services
18%
Tattoo artists/parlours, body piercing services
18%
Renting of equipment for weddings (cameras, photo equipment, flowers, plants) etc.
18%
Musical performances by artists, musical works and related services
18%
Same tax rates irrespective of location within India
One significant advantage of GST is its unified tax regime, where all states adhere to a single compliance and administrative procedure. The GST rate slabs are fixed and the services we mentioned above are taxed at the same rate across all the states of India. This ensures that the GST component cost - as a percentage - of your wedding expenditure remains unaffected by where it is held within India.
However, for alcohol, the story is different. It is important to mention that alcoholic beverages are not yet covered under GST and are subject to State Specific Value Added Taxes in India which vary from state to state.
Some important things to keep in mind while planning your wedding
Bundling and unbundling of wedding elements
The bundling of wedding elements, for example, venue hire and outdoor catering services, have certain GST consequences and an impact on wedding budgets. Depending on the scope of work, inclusions and exclusions, this bouquet of services can be considered as a composite or mixed supply.
If the venue is rented on a standalone basis without the catering services, irrespective of its nature (with or without a hotel room), then GST rate is 18%. However, if the venue is hired with catering services then it attracts GST at 5%. This will apply to venue without rooms or where the room rate does not exceed Rs 7500 per night. However, a venue hired with catering services having a room rate exceeding Rs 7,500 per night will attract GST at 18%.
Suppose the cost of hiring a venue (irrespective of nature of hotel) is Rs 1 lakh without food, in this case GST would be Rs 18,000. Let us assume the food bill by another vendor is Rs 1 lakh. GST on food bill would be Rs 5,000 (i.e. 5%). Thus, the total GST is Rs 23,000 (Rs 18,000 + Rs 5,000) for both services. If we engage the same vendor for both food and venue, the GST would be 5% of Rs 2 lakh (i.e. Rs. 10,000) and thus, there are savings to the tune of Rs 13,000, in this case. However, the cost of venue and catering services vary from vendor to vendor along with the services offered. Hence, there can be situations where hiring two different vendors is cheaper in terms of GST than hiring a single vendor for venue and catering services.
In some cases, it may also be fiscally prudent or more tax-optimal to unbundle certain services. If one hires a venue and catering services from same vendor, then, the GST rate is 5%. On the other hand, certain other wedding elements like décor, photography, hiring of singers or artists etc. typically attract a GST rate of 18%.
Suppose a venue with catering is hired for a cost of Rs 4 lakh and as an add-on, the venue is also offering décor and photography package of say Rs 1 lakh. As mentioned above, venue hire with catering would attract 5% GST (i.e. Rs 20,000) whereas décor and photography typically attract GST at 18% (i.e. Rs. 18,000). In this case, since décor and photography may not be considered a natural bundle by tax authorities, it is possible that the entire amount of Rs 5 lakh for a venue with all three services would be considered a mixed supply and taxed at 18% (resulting in a tax outlay of Rs. 90,000).
In these cases, it may be more cost-effective to engage a separate vendor for venue cum catering, and a separate one for décor and photography. If one vendor is only to be engaged, it is advisable to enter into separate contracts or at least segregate the billing and have a separate bill for the venue along with catering and a separate one for the décor. By entering into separate contracts or separate billing, there are potential savings to the tune of Rs 52,000 on a spend of Rs 5 lakh, which is nearly 10% of the expenditure.
Thus, it is very important to go through the contract and understand the tax implications of the services, both standalone and as a bundle.
Nature of venue
It can also be seen that GST is a deciding factor when choosing a venue. If the venue is a hotel (or a banquet within the hotel premises) with a room rate exceeding Rs 7,500 per night, then the applicable GST rate is 18%. As against that, if one hires a venue such as a club, gymkhana, or a hotel with lower cost of room per night than Rs 7,500, the rate is 5%. These rates shall apply even in the situation where the banquet hall/venue is hired without taking any rooms at the venue.
In the case of a banquet hall which is standalone and with no rooms or suites, the GST rate is 5% with catering and 18% on banquet hall if catering is separately engaged. GST will be 5% on catering services.
We would like to mention that where a hotel or venue also provides certain room nights as a part of the venue rental package, the GST treatment of the combined package would entirely depend on the contract terms and whether these are considered a natural bundle from a GST standpoint. If the accommodation is separately identifiable from the billing or the contract terms, then the amount attributable to catering and venue rent would attract 5% GST and the accommodation charges would attract GST at 12%.
Tax rates matter
We have seen in the examples cited above, that venue, catering, accommodation etc. which are a big part of the wedding spends, carry different GST rates, depending on the nature and contract terms. A wrong choice here can cost 13% of the overall budget due to variation in GST impact.
Also, engaging in a single contract for a whole host of services such as décor, photography, artist hire etc. with the same vendor who is doing your venue and catering can have higher GST incidence (18% as against 5%), if one does not segregate the contract and billing. Here too, a GST differential of nearly 13% is observed on the venue and catering, which is typically the biggest spend you are likely to do on your wedding.
Take, for example, that you have taken a venue with catering for Rs. 10 lakh, and in course of your negotiations with the venue, have gotten various things added to the contract, for example, as follows:
1. Photography and video package Rs 1 lakh
2. Décor package Rs 3 lakh.
In ordinary course, if these are separate contracts, the GST rate is 5% on Rs 10 lakh i.e. Rs 50,000 and 18% on Rs 4 lakh i.e. Rs 72,000. Thus, total GST outlay is Rs. 1,22,000. But if these are taken as a combination without segregation, the GST on the entire Rs 14 lakh would be 18% i.e. total GST outlay of Rs. 252,000. This works out to an incremental GST liability of Rs 130,000 which is nearly 10% of the venue and catering costs.
Conclusion
Thus we can see that GST can have a great impact on wedding budgets. Therefore, it is important to plan and optimise tax wherever permissible.
(Siddharth Surana, Director, RSM India - a tax consulting group. Views expressed are personal.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
