and Boost India’s Global Tourism Competitiveness
New Delhi, August 22, 2025 — The Federation of Hotel & Restaurant Associations of India (FHRAI), the apex body of the Indian hospitality industry, has called on Union Finance Minister Nirmala Sitharaman, who also chairs the GST Council, to rationalise the Goods and Services Tax (GST) for the tourism and hospitality sector. The industry body stressed that GST reform is crucial to positioning Indian hospitality as a true growth engine of the economy and a key contributor to India’s Vision 2047.
Welcoming the landmark GST reforms announced by Prime Minister Narendra Modi on August 15, FHRAI said the move reflects the government’s intent to simplify compliance, strengthen the tax framework, and pave the way for long-term growth. However, it cautioned that without a more equitable GST structure, the hospitality sector—one of India’s largest job creators and foreign exchange earners—will remain at a disadvantage compared to global peers.
Tourism currently contributes close to five per cent of India’s GDP, with the potential to double this share with the right policy interventions. Hospitality is also recognised as one of the strongest employment multipliers in the economy: every rupee invested generates 3.5 times in output, and each direct job creates an additional 3.2 indirect jobs. FHRAI underscored that such economic impact can only be realised if GST is rationalised to ensure affordability, competitiveness, and ease of doing business.
By comparison, regional tourism powerhouses such as Thailand, Vietnam, Indonesia, Sri Lanka, Singapore, and Malaysia levy GST or VAT on hospitality in the range of 6–10 per cent. India’s higher tax burden, FHRAI noted, inflates room tariffs, reduces affordability, and deters inbound travellers.
To address this, FHRAI has recommended a uniform GST rate of 5 per cent with input tax credit (ITC) across hotels, restaurants, and tourism services. It also urged the delinking of GST on food and beverage from room tariffs, pointing out that the current linkage creates inefficiencies and revenue losses. The Federation further requested that past GST payments be regularised on an “as-is basis” to resolve demand notices arising from earlier ambiguities in classification.
“Tourism is not just about travel—it is the backbone of inclusive economic growth,” said Mr. K. Syama Raju, President, FHRAI. “Rationalising GST is essential if India is to be affordable, competitive, and attractive to both travellers and investors. With the right reforms, Indian hospitality can double its GDP contribution, generate millions of new jobs, and become a cornerstone of Vision 2047.”
FHRAI reiterated its commitment to working hand in hand with the government to build a progressive GST framework that stimulates growth, investment, and jobs, while enhancing India’s position as a world-class tourism hub. The Federation said GST rationalisation will not just reduce costs for travellers—it will be the catalyst that allows the Indian hospitality sector to realise its full potential on the global stage.
