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FHRAI urges GST rationalisation for hospitality industry

FHRAI has said that the threshold limit of hotel room tariff with GST at 18% is  ₹7,500. This needs to be increased to  ₹9,500. (Photo: Mint)Premium
FHRAI has said that the threshold limit of hotel room tariff with GST at 18% is 7,500. This needs to be increased to 9,500. (Photo: Mint)

  • FHRAI has suggested that all food and beverage revenue of hotels be delinked from hotel room tariff slabs and establishments be allowed to charge GST at 5% without input tax credit under the composite scheme, and 12% GST with input tax credit

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NEW DELHI: Citing high inflation, Federation of Hotel & Restaurant Associations of India (FHRAI) has urged the GST Council to evaluate current goods and services tax (GST) structure for the hospitality industry, seeking rationalisation of rates.

With prices of edible oils, cooking gas, fuel, transport and other essentials going through the roof, the association, in a statement, said it has asked the Union government to consider simplification of GST rules to enable establishments to avail input tax credit.

It has suggested that all food and beverage revenue of hotels be delinked from hotel room tariff slabs and establishments be allowed to charge GST at 5% without input tax credit under the composite scheme, and 12% GST with input tax credit.

Similarly, for standalone restaurants, the FHRAI has asked that two slabs of GST rates be maintained as stated above and as was being done under the earlier service tax regime.

It has suggested a reduction in GST on cooking gas used in hotels and restaurants to 5% from 18% to bring down, operational costs which will also benefit customers. It has asked for either removal of GST on rent payments or be allowed input credit on rent payments to cushion the impact of high inflation.

“…For restaurants too, two separate GST slabs should be allowed; a composite slab rate at the present 5% GST without ITC and the other, at 10%. 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, rationalizing the GST rates for the industry could make a difference," said Gurbaxish Singh Kohli, vice president, FHRAI.

It said after the easing of pandemic-related curbs worldwide, GST in most countries that rely on FTAs has been reduced. However, GST rates in India continue to remain one of the highest in the world, making both domestic and in-bound tourism expensive.

Kohli said at present, the threshold limit of hotel room tariff with GST at 18% is 7,500. This needs to be increased to 9,500. At the time, when the threshold was fixed at 7,500, the exchange rate of dollar per rupee stood at 64, which is now 76 per dollar.

“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 1000 to 2000 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 incentivize them to spend their annual budgets in Indian cities other than holiday destinations of South East Asia," he added.

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