Rate-Based (Dynamic) tax

Juss Reyes

Updated January 09, 2024 19:53

This article explains how to easily set up the Rate-Based (Dynamic) Tax type in Cloudbeds PMS.

Overview

Rate-Based Tax (or Dynamic Tax) helps to serve the properties who are required to charge the GST tax according to the law (for example, in India). This tax percentage is calculated depending on the nightly room rate.

In Cloudbeds PMS, Rate-Based Tax (or Dynamic Tax) can be created by adding several rules. Each rule means that: If the nightly rate is greater than or equals a certain nightly rate amount, then the tax will be a certain percentage of the booked nightly rate. Learn more about these rules below.

Rate-Based (Dynamic) Tax Rule Types

Default Rule: Any room rate higher than 0 (but is less than the next rule amount) calculates a certain percentage from the booked room rate. Beginning with the default rule, the system considers that any room rate which is greater than 0 calculates certain percentage of nightly rate (0% by default).
Greater than: Anything greater than the price in new rule will use the entered tax tier; anything below it will be exempt. Continue to add rules as is required, to create tiers.

Manage Rate-Based (Dynamic) Taxes

Create a Rate-Based (Dynamic) Tax in Cloudbeds PMS

Follow the steps in this guide to start creating your new Rate-Based tax and complete the requested fields.
Select how the tax will be calculated (Exclusive/Inclusive)
Select the Rate-Based Tax option in the types drop-down menu
Enter the percentage for default amount (for all room rates above 0 but below the next rule amount)
Click +Add Rate Rule to add new rate-based rule
Enter the amount and percentage according to rule If greater than [amount] the tax will be [percentage]
Click Save

Remember to select Reservations in the Where will this tax/fee be available? option. If you select the Rate-based tax type, it will auto-select Reservations by default.
Cloudbeds PMS collects different room rates for different channels. Create both inclusive and exclusive tax and apply them to the corresponding third-party sources, depending on how the sub-total is imported from the channel (as NET or GROSS rate)

To create more tiers, click on +Add Rate Rule.
To apply the created taxes automatically, link them to the corresponding sources. Learn more: Taxes and Fees - How to apply Taxes and Fees to Reservation Sources

The tax will appear on the Taxes and Fees page where you can edit it any time. The screenshot below shows recommended setup of the tax for the properties based in India:

Important information for properties based in India

As per January 2022, these are the current tax slabs according to the Indian Government:

Default/1st rule (0%, no tax applied): If the room rate is less than INR 1000,00 (the 2nd rule)
2nd rule (12%, from nightly room rate): If the room rate equals INR 1001,00 or is higher than INR 1001,00 but is less than INR 2500,00 (the 3rd rule)
3rd rule (18%, from nightly room rate): If the room rate equals INR 2501,00 or is higher than INR 2501,00 but is less than INR 7500,00 (the 4th rule)
4th rule (28%, from nightly room rate): If the room rate equals INR 7501,00 or is higher than INR 7501,00

Indian Government requires that you setup the CGST (Central Goods and Service tax) and the SGST (State Goods and Service Tax). You can create a tax called CGST first, then create the tax SGST.

This information is for reference purposes only. Do verify these tax slabs with your accountant or tax advisor.

Every third-party OTA sends different information to channel managers. For example, some channels will send Net Rate as Sub Total while another can send Gross Rate as Sub Total.
Users should use discretion when configuring these taxes to OTAs, carefully selecting the tax type (exclusive vs. inclusive)
For properties based in India, check this source to get updated information on the tax slabs: Ministry of Finance in India: Tax Slabs

Booking.com - It is possible to setup GST on the Booking.com extranet, but it will be based on the average daily rate (for all the dates of stay) rather than actual daily rate for each date of stay. Do not setup GST on Booking.com Extranet, instead setup GST inside Cloudbeds PMS as an exclusive tax and apply it on top of the reservation rate.
Ingoibibo (Goibibo, Makemytrip, HotelTravel, and Easytobook) - Setup as inclusive and not exclusive tax on Cloudbeds PMS.
Yatra + TravelGuru - Setup as inclusive and not exclusive tax on Cloudbeds PMS.

If the Rate-Based Tax option does not appear on your Cloudbeds PMS account, contact our Support Team.

Other important considerations

Rate-based taxes are based on the transactional value, and will not work with all third-party channels (unless you have only one rate tier). Every third-party OTA sends different information to channel managers, some channels will not send the nightly rates which in some instances could result in the wrong tax tier being used.
Although in Cloudbeds PMS, taxes can be configured to specific sources, rate-based taxes will work correctly only with all Primary Sources.
The tax is calculated based on the original room rate (Gross). To setup rate-based tax as inclusive, it will take the percentage based on original room rate, not Net rate (after adjusting the inclusive taxes)

See other Taxes/Fees Types in Cloudbeds PMS here.