Hospitality Body Seeks GST Input Tax Credit Restoration Amid Rising Costs

Hotels Urge GST Council to Restore Input Tax Credit to Alleviate Mounting Costs

The Federation of Hotel and Restaurant Associations of India (FHRAI) is appealing to the Goods and Services Tax (GST) Council to reinstate the Input Tax Credit (ITC) for the hotel industry. This call comes as mid-market and budget hotels face significant financial strain due to increased operational costs, particularly in the aftermath of the GST regime’s 2022 amendment.

The amendment in question removed the ITC facility for hotels that opted for a lower GST rate of 12% on room tariffs below ₹7,500. This decision has effectively increased the tax burden on these establishments, as they can no longer offset their tax liability with the GST paid on their inputs, such as food and beverages, laundry, and other services.

FHRAI argues that this policy change has disproportionately affected mid-market and budget hotels, which cater to a large segment of domestic and international travelers. The inability to claim ITC means these businesses are absorbing higher costs, impacting their competitiveness and profitability. Industry stakeholders believe that the move was intended to boost government revenue but has instead placed undue pressure on a vital sector of the hospitality industry.

The association emphasizes that the restoration of ITC is crucial for the sustainable growth of the mid-market hotel segment. They propose that the GST Council consider reintroducing the credit facility, or alternatively, exploring other mechanisms to mitigate the increased financial burden on these hotels. The FHRAI’s plea highlights a growing concern within the hospitality sector regarding the cascading effect of taxes and the need for fiscal policies that support businesses, especially those serving a broader customer base.

Key Points

• FHRAI seeks the restoration of Input Tax Credit (ITC) for the hotel industry.
• The GST Council’s 2022 amendment removed ITC for hotels opting for a 12% GST rate on room tariffs below ₹7,500.
• This change has increased operational costs for mid-market and budget hotels.
• The inability to claim ITC means businesses cannot offset GST paid on inputs like food, beverages, and laundry.

Read the Complete Article.