Quick Summary
The Federation of Hotel Restaurant Associations of India (FHRAI) has appealed to the Union Finance Ministry to rationalise the Goods and Services Tax (GST) framework for the hospitality industry. The association has called for regularisation of past GST disputes, restoration of Input Tax Credit (ITC) benefitsand delinking of food and beverage (FB) GST rates from hotel room tariffs. In its representation to Finance Minister Nirmala Sitharaman, FHRAI said that the sector continues to face unreso
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FAQ :
FHRAI is urging the Finance Ministry to rationalise the GST framework for the hospitality industry. This includes regularising past GST disputes, restoring Input Tax Credit (ITC) benefits, and delinking GST rates for food and beverages from hotel room tariffs.
FHRAI states that many past GST disputes arose from technical inconsistencies and differing interpretations of 'declared tariff' and 'transaction value' since GST's rollout in 2017, not tax evasion. They want these resolved to end long-pending litigations.
FHRAI is concerned about the loss of ITC after GST on hotel rooms under Rs 7,500 was reduced from 12% to 5% without ITC. This has increased operational costs for mid-scale hotels, and FHRAI wants ITC restored, rooms recognised as 'plant and machinery' for ITC, and the tariff threshold revised.
FHRAI proposes delinking GST rates for food and beverages from hotel room tariffs. Currently, restaurants in hotels above a certain tariff pay 18% GST with ITC, while those below pay 5% without ITC. FHRAI wants all hotel restaurants to have the option of either 18% with ITC or 5% without ITC.
A study by FHRAI suggests that raising the tariff threshold could allow mid-segment hotels to increase tariffs during peak seasons, potentially boosting annual GST collections by over Rs 4,000 crore.
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