GST relief benefits consumers, but input tax credit withdrawal threatens hotel sector: FHRAI
Effective September 22, hotel rooms priced up to Rs 7,500 per night attract 5% GST--down from 12% earlier. Previously, only rooms up to Rs 1,000 were exempt, while those between Rs 1,000 and Rs 7,500 were taxed at 12%.
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The Federation of Hotel & Restaurant Associations of India (FHRAI), the apex body of the hospitality sector, has urged the government to reinstate Input Tax Credit (ITC) following the recent overhaul in Goods and Services Tax (GST) slab rates. Representing over 1 lakh hotels and 5 lakh restaurants nationwide, the body made the appeal at its 69th Annual General Meeting (AGM) held over the weekend.
Surendra Kumar Jaiswal, the newly elected FHRAI President, noted that nearly 90% of India’s hotels operate below a room tariff of Rs 7,500 and are now subject to 5% GST without ITC. While the revised structure lowers tax rates and is expected to benefit consumers and improve compliance, Jaiswal cautioned that it imposes structural cost burdens on hotels, especially in Tier II and Tier III cities.
He highlighted that the withdrawal of ITC has escalated unrecoverable costs on rentals, utilities, outsourced manpower, and capital expenditure, ultimately deterring investments and threatening the growth of domestic tourism. FHRAI has therefore called for early reinstatement of ITC and issuance of a clarificatory circular to eliminate compliance ambiguities.
The government, in August, announced a series of GST relaxations across sectors, including hospitality. Effective September 22, hotel rooms priced up to Rs 7,500 per night attract 5% GST--down from 12% earlier. Previously, only rooms up to Rs 1,000 were exempt, while those between Rs 1,000 and Rs 7,500 were taxed at 12%.
“Our industry is one of the largest employment generators and a critical driver of India’s service economy. Yet, the GST framework without ITC creates inequities that threaten competitiveness. We are not seeking concessions but fairness, clarity, and parity. By restoring ITC, addressing copyright ambiguities, and granting Infrastructure and Industry Status, the government can empower hospitality to fuel the vision of Viksit Bharat 2047 and secure India’s place as a global tourism hub,” Jaiswal said.
Beyond GST, Jaiswal flagged the issue of copyright harassment, where hotels and restaurants face overlapping royalty demands from multiple copyright societies. He urged the government to clearly define the role of copyright societies, prevent multiple collections for the same content, and shield establishments from unjustified litigation.
