The Federation of Hotel & Restaurant Associations of India (FHRAI) has put forward a comprehensive five-point reform plan to the GST Council, aiming to provide much-needed relief to the hospitality sector. This strategic move comes as the industry seeks to enhance its contribution to India's economic growth and align with the country's Vision 2047 goals.

Key Demands of the Reform Plan

1. Uniform 5% GST Rate: The FHRAI is advocating for a standardized 5% GST rate across all hospitality services, coupled with Input Tax Credit (ITC).

2. Reclassification of Hotel Rooms: The association proposes recognizing hotel rooms as Plant & Machinery, which would allow Input Tax Credit on renovations.

3. Delinking F&B GST from Room Tariffs: A call to separate the GST on Food & Beverage services from room tariffs.

4. Raising GST Threshold: The plan includes a suggestion to increase the 18% GST threshold on room tariffs from ₹7,500 to ₹15,000.

5. Regularization of Past GST Payments: The FHRAI is seeking to regularize past GST payments, potentially easing the financial burden on hospitality businesses.

Economic Impact of Tourism

The FHRAI has highlighted the significant economic impact of the tourism sector:

• Contributes over 5% to India's GDP
• Every rupee invested generates ₹3.50 in output
• One direct job in the sector supports 3.20 indirect jobs

Potential Benefits of GST Rationalization

The association believes that a rationalized GST structure could have far-reaching benefits:

• Potential to double the sector's contribution to GDP
• Support in achieving Vision 2047 goals
• Enhance overall economic growth and job creation

The FHRAI's proposal comes at a crucial time as the hospitality industry seeks to recover and grow in the post-pandemic era. By addressing key taxation issues, the sector aims to become more competitive, attract investments, and contribute more significantly to India's economic landscape.

As the GST Council considers these proposals, stakeholders in the hospitality industry are hopeful that the reforms will pave the way for sustainable growth and increased economic contribution in the years to come.

The Indian hospitality sector is poised for a potential boost as the Group of Ministers on GST rationalisation has approved a proposal to simplify the Goods and Services Tax (GST) structure. The new framework aims to consolidate the current multi-tiered system into two primary slabs of 5% and 18%, eliminating the existing 12% and 28% rates.

Impact on Travel and Accommodation

Industry experts believe this reform could have a significant impact on the hospitality sector by making travel and accommodation more affordable, potentially leading to an increase in domestic tourism. The simplified tax structure is expected to bring about several benefits:

• Rationalized Pricing: Nikhil Sharma from Radisson Hotel Group stated that the simplified framework could help rationalize pricing, making quality hospitality more accessible to a broader range of travelers.

• Increased Transparency: Ravi Rai from The Orchid Hotel noted that the new structure would bring clarity for both hotels and guests, resulting in more transparent pricing.

• Boost to Domestic Tourism: The streamlined GST structure is anticipated to make travel within India more attractive, potentially leading to a surge in domestic tourism.

Industry Response

The Hotel Association of India (HAI) has welcomed the move, emphasizing that GST rationalization is key to positioning India as a leading global tourism destination. The association sees this as a step towards achieving the ambitious goal of attracting 100 million foreign tourists annually by 2047.

Remaining Concerns

Despite the positive reception, some concerns remain within the industry:

• High Tax Rate: HAI President Kachru pointed out that the 18% tax rate for hotels is still considered high and could affect India's competitiveness in the global tourism market.

• Global Competitiveness: There are concerns that the relatively high tax rate might impact India's ability to compete with other popular tourist destinations that offer lower tax rates on hospitality services.

Looking Ahead

As the hospitality sector anticipates the implementation of this simplified GST structure, stakeholders are hopeful that it will lead to:

1. Increased affordability of quality accommodations
2. Growth in domestic tourism
3. Enhanced transparency in pricing for consumers
4. Potential boost in foreign tourist arrivals

The industry will be closely watching how these changes unfold and their impact on India's position as a global tourism destination. While the simplification is seen as a positive step, the sector may continue to advocate for further reductions in the tax rate to enhance India's competitiveness in the international tourism market.