Summary:
- FHRAI critical of GST impact on hotels under $85.
- Most changes took effect Sept. 22 to ease taxes and improve cash flow.
- Delhi recently dropped police-issued license requirement for hotels.
THE FEDERATION OF Hotel and Restaurant Associations of India said the country’s new goods and services tax framework on hotels with room tariffs below $84.75 would have an adverse impact. The association, representing more than 100,000 members, urged the government to reinstate input tax credit.
The 56th GST Council’s tax reduction is part of broader reforms introducing a two-slab structure: 5 percent for mid-market services and 18 percent for standard services, with a 40 percent rate for super-luxury, sin and demerit goods. Most changes took effect from Sept. 22, aiming to reduce the consumer tax burden, improve business cash flow and simplify compliance through automated refunds and registration.
Hotels with tariffs below $84.75 face a 5 percent levy without ITC under GST 2.0, which allows businesses to offset tax paid on purchases against tax collected on sales, preventing double taxation, The Tribune reported.
FHRAI said the withdrawal of ITC has raised costs on rentals, utilities, staff and capital spending. It said that hotels in tier II and III cities have been hit hardest, discouraging investment and slowing domestic tourism growth.
Surendra Kumar Jaiswal, FHRAI president, urged government intervention to protect an industry that supports over 60 million jobs and anchors India’s service economy.
“Our industry is one of the largest generators of employment and a key driver of India’s service economy,” Jaiswal said, according to The Tribune. “But the GST framework without ITC has created inequities that threaten our competitiveness.”
He also raised the issue of “copyright harassment,” where hotels and restaurants face overlapping royalty demands from multiple societies, creating legal and financial strain. He called for clearer definitions of society roles and safeguards against unjust litigation.
Jaiswal said the association seeks infrastructure and industry status for the hospitality sector to unlock low-cost credit and promote balanced regional development, especially in smaller towns.
“We are not seeking concessions, but fairness, clarity and parity,” he said. “By restoring ITC, resolving copyright ambiguities and granting infrastructure and industry status, the government can empower hospitality to support the vision of Viksit Bharat 2047.”
Delhi recently removed the requirement for police-issued licenses for hotels, motels and guest houses, a move welcomed by the Hotel Association of India.
