I went to India recently. I stayed at the Hyatt Regency in Delhi. I hate to say anything negative about the hotel – the facilities, including the room, the gym and the lounge, were just fine. But something negative did happen, and it did leave me with a very bad taste about the experience.
I will set forth the facts in the simplest terms possible.
I stayed at the hotel three nights. There were various legitimate rates available at approximately $100 per night. I booked one. I also used a Diamond suite upgrade, and was given a nice junior suite. I will blog about it one day soon.
There are quite a few hotel taxes in India, which together add up to approximately 20% per night. Thus, when I checked out of the hotel, I expected my bill to be roughly $120 per night, or $360 for three nights.
The night before I checked out, I went to the front desk and asked for a copy of my bill. Something looked horribly wrong. The tax imposed on the room was approximately $80 per night or 80%. Surely, this was an error. I brought it to the clerk’s attention and that’s when the problems ensued. They sneered at me and joked that I must be drunk. I wasn’t.
The clerk (or was it the manager, as I was beginning to feel like they were ganging up on me), then explained that, by law, tax is calculated on the published or rack rate of the room (a rate almost no one ever really pays), rather than on the rate actually charged for the room. Since I had used a suite upgrade, and they value the room at approximately $400 per night, they explained that I was responsible for $80 tax on the suite per night. When I complained, I was essentially told that I was trying to take advantage. I wasn’t. I was shocked.
The clerk then, after consulting with various other male employees, said he was correcting the bill.
He handed me another bill. I went to my room, and I still couldn’t make sense of the bill. Now the tax was about $40 per night, or 40% of the rate charged.
When I went to pay the next morning, I asked why the tax was still so high. I was told that they removed the tax for the suite I’d been upgraded to, but that they still valued the room I had originally booked at about $200 per night (rather than the $100 rate per night charged), so I must pay $40 per night tax.
I knew I couldn’t get anywhere further with them, so I paid the bill under protest and contacted Hyatt customer service when I got home. They kindly apologized for the clerks’ behavior, and refunded the excess charges to my credit card.
None of us could make heads or tails of whether such a law really exists in Delhi, requiring taxation on the value or published rate of a hotel room rather than the rate charged. There are two threads in Flyertalk on the topic, here and here. If you read through the Flyertalk threads, you’ll see that this is not an isolated occurrence. Others have occasionally faced the same issues that I faced. People have referred to a legal provision in paragraph #36 of the Flyertalk thread to possibly justify the rack rate taxation. That thread, from 2006, states:
Govt. of NCT of Delhi, Office of Commissioner (Excise, Entertainment & Luxury Tax) (Luxury Tax Branch)
…
2. As per the provisons of the amended Act, Luxury Tax shall be levied on the decalred/published tariff with regard to newely insterted sub-section-4 of section-? which provides that where the luxury priveded in a hotel to any person (not being an employee of the hotel) is not charged at all, or is charged at a concessional rate nevertheless there shall be evied and colleced the tax on such luxury, as if full charges for such luxury were paid to the hotelier.It implies that it is the liability of the hotelier to collect and deposit the tax on declared/published tariff irrespective of whether any concession on the same is provided or no tariff is charged. All the concerned are hereby directed to collect the tax as per the amended provisions. (errors in original)
The above is the only legal reference in the Flyertalk threads that I could find to “justify” this exorbitant tax. In fact I reviewed the Indian Government Luxury Hotel provisions and could not find any mention of “published” rate taxation. Under Rate of Tax, the Indian Law states:
| Rate of Tax |
| The luxury tax is levied on the turnover of receipts of a hotelier at the notified rate not exceeding 15%. The Govt. may notify different rate(s) from time to time and for the different classes of hotels. At present the rate of Luxury Tax is 10% and this is being levied w.e.f 22-06-2009 on declared tariff. |
Does this provision support the hotel’s position that they must apply tax on the inflated rack rate? I don’t know. Do the Indian Tax officials actually calculate hotel tax based on the rack rate or on the amount paid by the guest for the room? I don’t have the answer, but something doesn’t seem right.
Have you traveled to Delhi, India recently? What was your experience with the hotel tax?
A New York frequent flyer who elegantly combines her passions for worldwide travel, running a gazillion marathons all over the globe and staying fit ... without sacrificing her fancy for good wine and food.
You got ripped off and the hotel probably used the excuse for upgrading you to their advantage since it muddies the accounting. The whole rack rate arguement is BS and perhaps is only offered to foreign tourists.
Countless times, including at Hyatt/SPG/HH hotels, I have never had this issue. This includes Hyatt Regency in Delhi.
I felt taken advantage of. I’m a lawyer. Their claims made no sense. I still cannot find a basis for their weird taxation. My stay ended on a poor note, and I really wish I’d taken advantage of the 5,000 pointbreak at the Delhi Airport Holiday Inn.
Loyalty doesnt count much at these hotels. Most of these are owned by real-estate moguls who have owned them for decades. Their top clientele is not western, but localites with $$ to spend, weddings, politico etc. 90% of their rooms are booked by tourist agencies, corporate or people who walk in and often pay cash.
I spoke personally to ex-Hilton-Janakpuri owner last year who decided after building the entire hotel that he wanted to be a hilton franchise, and then 2 years later decided, nah – isn’t worth it.
The whole dynamic between hotels chains, individual hotels and tourists isn’t the same in hotels in India. For example, Hyatt Regency houses some of the most expensive Delhi restaurants and a 4 person meal there can be as expensive as the room. So really, do you think they care about your experience?
Further to this – just be glad you were staying at a chain hotel so you had some recourse to corporate…
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From my experience, this is part of the cost of westerners doing business in India. That is why Hyatt refunded you the money when you complained. The scope of the problem is evident when a upscale western chain does this and persisted in doing this even after you complained.
I had initially assumed this was just normal corruption but upon reflection it could be even worse. Perhaps the people at Hyatt really don’t know the tax law since Indian tax law is such a mess and thought they were charging the right tax.
It isn’t just the cost of foreigners doing business or Hyatt not knowing the tax law. I am pretty sure the hotel has got some top tax consultants to work for them. The primary issue here and this affects anyone staying out in these hotels is the convenient interpretation of the law to suit their benefits.
That is also what I have been told, the luxury tax is based on the Rack rate of the room you have paid for.
I had the same thing happen to me when I was upgraded to an Club room at the Hyatt Regency Mumbai. I prepaid for the room online and was upgraded as a Diamond.
While checking out, I received a bill for more than what I paid for online. The invoice was for the whole room, plus taxes. I refused to pay for it since I already paid and they quickly tore up the new bill, then sent me on my way.
It seems like it might be a common scam.
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Kathy,
It is not just Delhi where you see that level of inflated tax rates on Hotels. I typically see them when I am in Hyderabad as well. I did ask the manger there one time and he at least gave me a reasoning that made some sense.
It went something along the lines of this. The Indian government and the local states don’t have the “initiative” to actually go through the hotel records and see what the rates that each person paid when the stayed at the hotel. They know that the hotels will always find ways to cheat the tax man, by saying that a person stayed at a particular rate when in fact they stayed at a higher rate. Thereby allowing the hotel to collect some additional revenue without the guest being wiser. As hotels are required to report guests to the police and such when the check in the government knows who was at the hotel, and thus the number of rooms let. By using the Rack Rate for the rooms the government can quickly and easily tell if the rate has been paid properly. This is the exact reason why the hotel knew they could drop the rate to the room you booked. The government knew you stayed there, thus the hotel had a bill to pay, but didn’t know what room you stayed in. So basically, it comes down to the idea that the government doesn’t trust the merchants, and doesn’t want to audit everyone. So they went for simplicity.
The only time this can backfire, is if the hotel is completely full. The government is expecting a very specific amount back and so the hotel either has to eat the cost itself or charge you for it.
The Westin in Mindspace in Hyderabad actually has/had a note in their guest book that says “due to government regulations taxes will be calculated on the published full rate on the room and not the rate that the guest paid.”
thanks Nathan. This could be true or it can be an elaborately woven scam. I’m trying to discern which it is.
Had something similar happen to me many years ago at the Hilton Rome Calverleri now a Waldorf in Italy
Had to work out with Hilton corporate when I came back
They said it was taxes and a point redemption charge
the FT Le Meridien Delhi thread has some discussion of this as well.
thanks.