NEW DELHI : Citing the unprecedented rise in inflation, the Federation of Hotel & Restaurant Associations of India (FHRAI) has requested the GST Council to evaluate the present GST structure for the hospitality sector and appealed for it to be rationalised.
With prices of edible oils, cooking gas, fuel, transport and other essentials going through the roof, the association said in a statement that it has asked the government to consider simplification of GST rules to enable the establishment to avail of Input Tax Credit (ITC) ).
It has suggested that all food and beverage revenue of hotels be delinked from their hotel room tariff slabs and allowed to charge GST at 5% without ITC under the composite scheme and 12% GST with ITC. similarly, also for standalone restaurants, the body has asked that two slabs of GST rates be maintained as stated above as was being done in the earlier service tax regime. The body has suggested a reduction in GST on LPG used in hotels and restaurants from 18% to 5% to bring down the operational costs which will benefit customers. It has also asked for either the removal of GST on rent payments or be allowed input credit on rent payments to cushion the blow of the rising inflation.
“All F&B revenue should be delinked from any room tariffs, if they are part of hotels, by allow 5% composite scheme for units that are not availing ITC and 12% GST for units that are availing ITC. Simplification of GST rules will lead to greater compliance especially from small units. A mechanism should be in place to enable the establishment to avail input of GST paid on rent and other GST costs. This will make the businesses more viable. For restaurants too, two separate GST slabs should be allowed; a composite slab rate at the present 5% GST without ITC and the other, at 10%. The steady rise in the prices of commercial LPG almost every month, fuel, oil and essential commodities are hampering the revenue. The industry is trying to overcome the crisis of over two years and is only trying to make a recovery. At such times, rationalizing the GST rates for the industry could make a difference,” said Gurbanxish Singh Kohli, vice president of the association.
The body has also stated that post the easing of restrictions worldwide, GST in most countries that depend on FTAs has been reduced. However, GST rates in India continue to remain one of the highest in the world, making both domestic and inbound tourism extremely expensive.
He said that at present, the threshold limit of hotel room tariff with GST at 18% is 7500. This needs to be increased to 9500. At the time, when the threshold was fixed at 7500, the exchange rate of dollars per rupee stood at 64, but the same has breached 76 per dollar today. “Raising the threshold limit will bring parity of rates between the rupee and the dollar. Also, the threshold limit for zero GST on hotel rooms should be increased from 1000 to 2000 per room per day. This will help give boost to the budget segment hotels, encourage more domestic tourists to travel and promote tourism in the country. IGST billing also should be allowed to hotels for corporate bookings and MICE. This will enable the companies to avail GST input credit which will incentivize them to spend their annual budgets in Indian cities other than holiday destinations of South East Asia,” he added.