Hospitality Sector Eyes Infrastructure Status, GST Reforms in Upcoming Budget

India's hospitality industry is setting its sights on transformative reforms to unlock its full potential and compete globally. Industry stakeholders are calling for infrastructure status to lower financing costs, rationalisation of Goods and Services Tax (GST) rates to enhance competitiveness, a digital single-window clearance system for hotel licenses and approvals, and initiatives to develop a skilled workforce.

Key Demands from the Hospitality Industry

1. Infrastructure Status for Hotels: The Hotel and Restaurant Association of Western India (HRAWI) has advocated granting infrastructure status to hotel and convention centre projects costing ₹10 crore or more. This would allow access to long-term, low-cost financing, particularly benefiting small and medium-sized enterprises.

   "Infrastructure status will catalyse growth in the hospitality sector, helping India achieve its vision of becoming a $1 trillion tourism economy by 2047," said HRAWI spokesperson and vice-president of the Federation of Hotel and Restaurant Associations of India (FHRAI).

2. Rationalisation of GST Rates: Industry leaders are pushing for GST rate reductions to make India more competitive among global tourism destinations. Suggestions include:

   • Reducing GST on hotel rooms priced above ₹7,500 from 18% to 12%.
   • Lowering GST for hotel restaurants to 12% with full input tax credit (ITC).
   • Introducing a lower GST rate for MICE (meetings, incentives, conferences, and exhibitions) segments to attract international business tourists.

   "Reducing GST will attract more international visitors and help the sector regain its competitive edge over other Asian countries," said the president of the Hotel Association of India (HAI) and chairman, South Asia, Radisson Hotel Group.

3. Simplified GST Compliance for Online Travel Agencies: Online travel agencies are seeking centralised GST registration to reduce compliance burdens and create a level playing field against global competitors.

4. Digital Single-Window Clearance System: Creating a digital platform for hotel licenses, no-objection certificates (NoCs), and approvals is seen as a crucial step toward easing business operations and reducing bureaucratic delays.

5. Public-Private Partnerships (PPP) and Regional Tourism Development: The co-founder and CEO of Zo World highlighted the need for incentivised PPP models to develop untapped tourist destinations. Affordable land and tailored schemes for tourism operators could diversify travel options and boost regional economies.

6. Skill Development for the Workforce: Addressing the skill gap in the sector is critical for its future. The Tourism and Hospitality Skill Council (THSC) has called for increased funding for skill development, apprenticeships, and digital transformation to prepare the workforce for upcoming challenges.

Overcoming Challenges

India's hospitality sector faces a significant shortage of hotel rooms compared to global peers, coupled with slow recovery in foreign tourist arrivals post-COVID-19. The industry is also grappling with high airfares due to rupee depreciation and rising aircraft fuel costs, prompting calls for government subsidies or exemptions.

Investments in tier-II and tier-III cities and renewed global tourism campaigns like "Incredible India" are seen as essential to boosting inbound tourism and driving balanced regional growth.

The Road Ahead

As India strives to become a $1 trillion tourism economy by 2047, implementing these reforms could generate substantial employment opportunities, attract foreign investments, and strengthen the sector's contribution to GDP. With strategic measures, India's hospitality industry could emerge as a cornerstone of economic transformation.