The Federation of Hotel and Restaurant Associations of India (FHRAI) has raised serious concerns over the recent revision in GST rates, stating that while the move aims to rationalize taxes and improve compliance, it has inadvertently created structural cost burdens on India's hospitality sector - particularly affecting small and mid-scale hotels in Tier II and Tier III cities.
Speaking at the association's 69th Annual General Meeting, the newly elected FHRAI President said that the withdrawal of ITC under the current GST framework has escalated operational costs and dampened investment sentiment across the sector.
"As much as 90% of India's hotels operate below a room tariff of Rs 7,500 and are now taxed at 5% without ITC. The withdrawal of ITC has turned essential expenses like rentals, utilities, outsourced manpower and capital expenditure into unrecoverable costs," the FHRAI President said.
He explained that while the government's intention behind GST rationalization was to simplify tax structures and support consumers, the absence of ITC benefits has distorted the cost structure, leaving smaller hotels struggling to remain viable.
The hospitality body has urged the government to reinstate ITC and issue a clarificatory circular to eliminate ongoing ambiguities in compliance.
"Our industry is one of the largest generators of employment and a key driver of India's service economy. Yet, the GST framework without ITC has created inequities that threaten our competitiveness. We are not seeking concessions but fairness, clarity and parity," he added.
The association said restoring ITC would not only encourage reinvestment and capacity expansion but also align the hospitality sector with India's long-term economic vision.
"By restoring ITC, addressing copyright ambiguities and granting Infrastructure and Industry Status, the government can empower hospitality to support the vision of Viksit Bharat 2047 and help India achieve its rightful place as a global tourism hub," the President stated.
Copyright and Compliance Concerns
Beyond GST-related issues, the FHRAI President also highlighted the ongoing challenges of copyright royalty demands, where multiple societies raise overlapping claims, leading to unjustified legal and financial pressures on hotels and restaurants.
"Copyright harassment has become a serious issue for establishments, with several societies demanding royalties for the same content. We urge the government to clearly define the roles of copyright societies, prevent duplicate collections, and protect hotels from wrongful litigation," he said.
Sector Represents Over 6 Lakh Establishments
Representing over 1 lakh hotels and 5 lakh restaurants across India, FHRAI reiterated that policy stability, tax parity, and regulatory clarity are vital to strengthening the hospitality ecosystem - one that plays a critical role in employment generation, tourism promotion, and service exports.
The association's appeal comes at a time when India is aiming to expand its tourism infrastructure and enhance global competitiveness under initiatives like Dekho Apna Desh and Viksit Bharat 2047.
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