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The Federation of Hotel Restaurant Associations of India (FHRAI), the apex body representing the country's hospitality industry, has appealed to the GST Council to reconsider its recent changes to hotel taxation. The association has warned that the withdrawal of ITC could have a severe impact on th
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FAQ :
FHRAI's main concern is the withdrawal of Input Tax Credit (ITC) for hotels, which they argue will lead to significant cost burdens and financial unsustainability, especially for smaller and mid-scale hotels.
FHRAI has appealed against the GST Council's decision to reduce the tax rate on hotel rooms priced below Rs 7,500 per night from 12% to 5% while simultaneously removing the ITC on these tariffs.
With the new 5% rate and no ITC, hotels must now absorb unrecoverable GST, typically 18%, on expenses such as rentals, outsourced manpower, utilities, maintenance, and capital expenditure, leading to increased operating costs.
FHRAI has also flagged the requirement to link Food & Beverage (F&B) services with room tariffs, uncertainty over transition provisions, and has demanded that F&B be delinked from room tariffs for simplification.
FHRAI recommends restoring ITC (fully or partially), delinking F&B from room tariffs, recognising hotel rooms as 'plant and machinery' for renovation ITC, regularising past GST disputes, and raising the GST threshold on tariffs to Rs 12,500.
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