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 myfrontdesk you can easily setup this tax type by adding several rate rules
(for properties based in India) Please check this source to get updated information on the tax slabs: Ministry of Finance in India. Tax Slabs
Please note, 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)
When setting up the tax, a user would select a new tax type - Rate-based Tax/Fee. This will allow to create a series of rules.
Each rule means the following: 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.
Please note that the tax is calculated based on original room rate (Gross). If you will setup rate-based tax as inclusive - it will take the percentage based on original room rate, not Net rate (after adjusting the inclusive taxes)
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).
To create the next tier, the user should add a new rule:
Anything greater than the price in new rule will use the entered tax tier; anything below it will be exempt. The user can continue to add rules as is required which will create tiers.
To apply the tax to the reservations automatically the user will need to apply the tax to the specific reservation source(s).
Learn how to do it in this article: Applying Taxes and Fees To Reservation Sources
Example:
As of October 1st, 2019, please check below the most updated tax slabs
The example below shows that the property has configured rate-based taxes CGST with the following slabs:
- (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 7500,00 (the 3rd rule)
- (3rd rule) 18% (from nightly room rate) if the room rate equals INR 7501,00 or is higher than INR 7501,00
The taxes are configured to be exclusive:
The taxes are configured to be applied automatically for all reservations coming from source "Booking.com":
If the guest books a room on Booking.com, this is what the reservation folio/rates breakdown will look like (taxes are exclusive):
The taxes on the balance due drop-down will look like:
The Indian Government announced on September 20th and confirmed on September 28th a change in rate based taxes. Now the tax slabs are going to change starting from Octobert 1st as shown below:
- (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 7500,00 (the 3rd rule)
- (3rd rule) 18% (from nightly room rate) if the room rate equals INR 7501,00 or is higher than INR 7501,00
1. In myfrontdesk go to "Taxes and Fees" page
2. Click "+New Tax"
3. Select "Tax"
4. Select "Reservations" (*if you select rate-based tax it will auto-select Reservations anyway)
5. Enter tax name
Indian Government requires that you setup CGST (Central Goods and Service tax) and SGST (State Goods and Service Tax) taxes. You can create a tax called "CGST" first, then create the tax "SGST"
6. (optional) Enter tax code
7. Select how the tax will be calculated
Please note that myfrontdesk collects different room rate for different channels, it's likely that you will need to create both inclusive and exclusive tax and apply them to appropriate third-party sources depending on how the sub-total is imported from the channel (as NET or GROSS rate)
8. Select type "Rate-Based Tax"
9. Enter the percentage for default amount (for all room rates above 0 but below the next rule amount)
10. Click "Add Rate Rule" to add new rate-based rule
11. Amount - enter the amount according to rule "if greater than [amount] the tax will be [percentage]"
12. Percentage - enter the amount according to rule "if greater than [amount] the tax will be [percentage]"
Add more rules if needed by following steps 9 and 10.
13. Click SAVE
14. (optional, for Indian government) Repeat the steps above to create CGST/SGST tax
The tax will appear on "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:
14. (*if you want the tax to be applied automatically) Configure the tax for the needed sources (on "Reservation Sources" page) for the tax to be applied to the reservations automatically:
Please note that rate-based taxes are based on the transactional value, and therefore 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 myfrontdesk taxes can be configured to specific sources, rate-based taxes will work correctly only with all Primary Sources.
Please proceed with changes only after your nightly charged / posted transactions on October 1st, 2019.
Please visit this article to check all the details and how to proceed: Rate-Based Tax - October 1st Changes
| OTA | How OTA sends the rate to myfrontdesk (as NET or GROSS (with OTA commission or not), any other limitations, specifics) |
Is it possible to setup GST on Extranet? | What is the recommended GST setup for this OTA? |
|---|---|---|---|
| Booking.com | Yes but it will be based on the average daily tariff (for all the dates of stay) rather than actual daily tariff for each date of stay | Do not setup GST on Booking.com Extranet. Instead setup GST inside myfrontdesk 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 myfrontdesk | ||
| Yatra + TravelGuru | Setup as inclusive and not exclusive tax on myfrontdesk |
On invoicing settings tab , you can enable an option to show 'Tax Specifics'. If enabled, and you have multiple taxes, a breakdown of the total of each tax will appear at the top of the invoice.
Learn more about Invoice Settings on in our knowledge base:
Taxes & Fees - Everything you need to know
Invoicing - How to manage and use
If this tax type does not appear on your myfrontdesk account - please contact our Support Team at support@cloudbeds.com or get in touch with your Cloudbeds Market Manager.
