Hospitality Body Urges GST Rationalisation to Protect Industry Growth

New Delhi, Sep 25 (KNN) The Hotel and Restaurant Association of Western India (HRAWI) has urged the government to reconsider recent changes in the Goods and Services Tax (GST) structure for the hospitality sector.

 The association stated that while the sector contributes nearly 5.8% to India’s GDP and employs over 32 million people, the revised GST norms could hinder growth, increase costs, and affect competitiveness.

As per the new rules, hotel rooms priced up to Rs 7,500 per night will now attract a reduced GST of 5%, down from 12%. However, these hotels will no longer be eligible for Input Tax Credit (ITC).

HRAWI argued that the removal of ITC defeats the very purpose of GST, which was introduced to eliminate cascading taxes and ensure seamless credit flow.

The association highlighted that the denial of ITC will increase costs for hotels by up to 10%, as they will be unable to claim credit for taxes paid on inputs such as furniture, linen, rent, utilities, and maintenance.

This is expected to particularly impact budget and mid-segment hotels, which form the backbone of India’s domestic tourism market.

HRAWI has also raised concerns about the continued linkage of food and beverage (F&B) services to room tariffs. With dynamic pricing in hotels, the association believes this rule is impractical and has requested that F&B services be taxed independently, allowing businesses to choose between 5% GST without ITC or 18% GST with full ITC.

To strike a balance, HRAWI has proposed that hotels charging under Rs 7,500 should either pay 5% GST with 50% ITC or 18% GST with full ITC on two-thirds of the value. They have also sought a mandatory composition scheme for F&B businesses with turnover up to Rs 5 crore.

In a formal representation to the Prime Minister, HRAWI stressed the need for rationalisation, warning that the current framework could hurt tourism, investment, and job creation in the sector.

(KNN Bureau)