The Federation of Hotel & Restaurant Associations of India (FHRAI), the apex body of the country’s hospitality sector, has called on the GST Council to review its recent decision on hotel taxation. The association warned that the withdrawal of input tax credit (ITC), despite a GST rate cut, could severely impact the financial health of hotels, particularly in the budget and mid-scale segments.
Earlier this month, the GST Council reduced GST on hotel rooms priced below INR7,500 per night from 12% to 5% but withdrew ITC benefits. While positioned as consumer-friendly, FHRAI cautioned that the move undermines GST’s principle of seamless credit.
“Without ITC, operating costs rise sharply—hurting smaller hotels that are the backbone of Indian tourism,” said K. Syama Raju, President, FHRAI, adding that the decision threatens reinvestment and competitiveness.
FHRAI also flagged anomalies such as linking Food & Beverage (F&B) services to room tariffs, unclear transition rules, and outdated tariff thresholds. Among its key demands are restoring ITC (fully or partially), delinking F&B from room tariffs, raising the 18% GST threshold to INR12,500, and recognising hotel rooms as “plant and machinery” for ITC on renovations.
The association stressed that a supportive tax regime is vital for the sector to contribute effectively to India’s Vision 2047 and Viksit Bharat goals.
