With GST council meet coming up on May 28, the Hospitality industry is reaching out to the government to put forth their demands and hope for the support. Federation of Hotel & Restaurant Associations of India (FHRAI) has submitted a representation to finance minister Nirmala Sitharaman requesting the Council to include impactful policy measures required to help the hospitality industry in its survival efforts.
Some of the major demands raised are changing the threshold limit of hotel room tariff for charging GST at 18% from present Rs 7,500 to Rs 9,500 and raising rates for zero GST for hotel rooms from present Rs 1,000 to Rs 2,000 per room per day. Other major requests are F&B revenue across hotels and standalone restaurants be treated as bundled services to be charged GST at 5% composite scheme for units not availing ITC and 12% GST for units availing it.
The body also urges the government to allow valid GST hotel bills of any state other than the home state paid for by digital mode exempt under section 80C for an additional amount of Rs. 50,000, allow IGST billing to the hotels for corporate bookings & MICE, removal of GST on rent payments and refund of unutilized GST credit lying with the state. The industry body requests a new provision in law for immediate refund of GST paid by new hotel projects and existing expansions
The FHRAI has stated that India’s Tourism and Hospitality sectors is among the worst hit due to pandemic and every step to revive the sector will be crucial in the long-term health of both the sector and the country’s economy. In a letter, FGRAI asserts lockdown curbs in various states and cities have impacted hospitality business enormously. It explains the revenue of the industry was below 20 percent of pre-pandemic levels at the beginning of the year 2021 and March onwards, the revenue has crossed not even 5 percent.
Explaining some of the major demands raised, Gurbaxish Singh Kohli, Vice President, FHRAI, said “We are requesting for the threshold limit for charging GST at 18 percent on hotel room tariffs be raised from the present Rs 7,500 to Rs 9,500 for bringing parity of rates between the Rupee and the Dollar. Also, the threshold limit for zero GST for hotel rooms should be raised from the present Rs 1,000 to Rs 2,000 per room per day. Also allowing valid GST hotel bills of any State other than the home state of the Individual assesee paid for by digital mode exempt under section 80C for an additional amount of Rs 50,000 will encourage citizens to travel within India which will further give a much needed impetus to hotels as well as ancillary industries.”
Kohli added that due restricted foreign travel, promotion of domestic tourism is the need of the hour. He also explained when the threshold of room rates was fixed at Rs 7,500, the exchange rate of Dollar per Rupee stood at Rs 64, whereas the same has reached Rs 73 per Dollar. For raising zero GST, Kohli says the move will boost the lower budget segment, thus encouraging domestic travel and promoting tourism sector in a big way.
FHRAI’s letter details Indian hotel industry’s total revenue in FY 2019-20 stood at Rs 1.82 lakh crores. As per industry estimates, it states, in FY 2020-21, approximately 75 percent of the industry’s revenues got wiped off. That is more than Rs.1.30 lakh crore revenue hit it claims. Lockdown curbs across various States and cities have impacted hospitality business enormously.
“We are requesting that all F&B revenue in a hotel and standalone restaurant be treated as bundled services and be charged 5 percent GST on composite scheme for units that are not availing ITC and 12 percent GST for units that are availing ITC. IGST billing to the hotels for corporate bookings and MICE should also be allowed since it will enable the companies to avail GST input credit which will incentivize them to spend their annual budgets in Indian cities rather than spending it at holiday destinations of South East Asia,” added Pradeep Shetty, joint honorary secretary, FHRAI.
The FHRAI has pointed out that lack of capital, dearth of the workforce, and mounting losses is threatening tourism and hospitality industry which accounted for around 10 percent of the GDP, supported around 90 million jobs, and generated Foreign Exchange Earnings (FEE) to the tune of Rs.1,94,881 crores (US$ 29.96 billion) in 2019.
“We request the GST Council to remove GST for rent payments for those who are not eligible to claim the input tax credit. More importantly, hospitality establishments must be allowed to get refund of unutilised GST credit lying with State Governments which will enable them to get the much needed liquidity,” suggests Kohli.