FHRAI seeks GST rationalisation for hospitality sector

Requests GST Council to evaluate present GST structure for the industry

Citing the unprecedented rise in inflation, hospitality association Federation of Hotel & Restaurant Associations of India (FHRAI) has requested the GST Council to evaluate the present GST structure for the hospitality sector and appealed for it to be rationalised. With prices of edible oils, cooking gas, fuel, transport and other essentials increasing, FHRAI has asked the central government to consider simplification of GST rules to enable the establishments to avail Input Tax Credit (ITC). FHRAI has suggested that the F&B revenue of hotels be delinked from their hotel room tariff slabs and hotels be allowed to charge GST at 5 per cent without ITC under the composite scheme and 12 per cent GST with ITC. Similarly, also for standalone restaurants, FHRAI has asked that two slabs of GST rates be maintained as stated above as was being done in the earlier Service Tax regime.

FHRAI has suggested a reduction in GST on LPG used in hotels and restaurants from 18 per cent to 5 per cent to bring down the operational costs which will benefit customers. It has also asked for either the removal of GST on rent payments or input credit on rent payments to cushion the blow of the rising inflation.

Gurbaxish Singh Kohli, Vice President, FHRAI , said, “All F&B revenue should be delinked from any room tariffs, if they are part of hotels, by allowing 5 per cent composite scheme for units that are not availing ITC and 12 per cent GST for units that are availing ITC. Simplification of GST rules will lead to greater compliance especially from small units. A mechanism should be in place to enable the establishments to avail input of GST paid on rent and other GST costs. This will make the businesses more viable. For restaurants too, two separate GST slabs should be allowed - a composite slab rate at the present 5 per cent GST without ITC and the other, at 10 per cent. The steady rise in the prices of commercial LPG almost every month, fuel, oil and essential commodities are hampering the revenue. The industry is trying to overcome the crisis of over two years and is only trying to make a recovery. At such times, rationalising the GST rates for the industry could make a difference.”

The FHRAI has also stated that post the easing of restrictions worldwide, GST in most countries that depend on FTAs has been reduced. However, GST rates in India continue to remain one of the highest in the world, making both domestic and inbound tourism extremely expensive.

Kohli added, “At present, the threshold limit of hotel room tariff with GST at 18 per cent is Rs 7,500. This needs to be increased to Rs 9,500. At the time when the threshold was fixed at Rs 7,500, the exchange rate of Dollar per Rupee stood at Rs 64, but the same has breached Rs 76 per Dollar today. Raising the threshold limit will bring parity of rates between the Rupee and the Dollar. Also, the threshold limit for zero GST on hotel rooms should be increased from Rs 1,000 to Rs 2,000 per room per day. This will help give boost to the budget segment hotels, encourage more domestic tourists to travel and promote tourism in the country. IGST billing also should be allowed to hotels for corporate bookings and MICE. This will enable the companies to avail GST input credit which will incentivise them to spend their annual budgets in Indian cities other than holiday destinations of South East Asia.”


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