The VAT is being implemented state by state (with some holdouts still), but this so-called luxury tax implementation on rack rate vs. actual rate has come to my awareness only recently. There's been a (Union Finance Ministry-related) "luxury"/"occupancy" tax for years now on hotels (especially higher-end ones), but charging the tax on rack rate has never been clearly noted to me before.

In any event, the websites on which we book hotels should disclose this properly so that there are no surprises on check-out. An 11 to 13% higher-than-expected cost can and will push some people into violating the travel policies of their employer and/or of their clients.

I am also curious, like some others, whether or not the hotels are actually paying the taxes on some inflated rack rate or the taxes on the actual receipts. And if the taxes are calculated as a percentage of rack rate, perhaps a clear, up-front disclosure of the actual taxes chargeable would be advisable and beneficial for all.

Also, what happens if a top-tier status member of a chain gets an upgrade? Then do we pay the tax on the rack rate for that upgraded room or worse yet suite?