The Federation of Hotel & Restaurant Associations of India emphasised that the current practice of linking F&B taxation to hotel room tariffs is both unfair and operationally challenging for the hospitality industry.
The Federation of Hotel & Restaurant Associations of India (FHRAI) has called on the government to separate the Goods and Services Tax (GST) rates on food and beverage (F&B) services from hotel accommodation charges, saying the move would not only simplify taxation but also bring substantial savings for guests.
In a statement issued on Sunday (March 100, FHRAI highlighted that the current GST structure — where F&B taxation is tied to the room tariff of the hotel — is both unfair and impractical for the hospitality sector. The association has made several representations to the authorities urging for a policy shift that reflects ground realities.
As per the existing rules, hotels charging Rs 7,500 or more per room per night are required to impose an 18% GST on their F&B services, but they can claim input tax credit (ITC). On the other hand, restaurants in hotels with room tariffs below that threshold must levy just 5% GST, but without the benefit of ITC. This dual structure has led to operational confusion and added compliance burdens for hoteliers.
Call to unlink GST from room tariffs
FHRAI has proposed a flexible system allowing all hotel restaurants to independently opt for either 18 per cent GST with ITC or 5 per cent without ITC, irrespective of the room rates. “With regard to our request of delinking this particular GST which is the threshold of Rs 7,500 which is there today, as a result of which the moment a hotel sells a room above Rs 7500, the GST rate for the restaurant within the same hotel moves from 5 per cent to 18 per cent. So this is the delinking we have requested for,” Pradeep Shetty, Vice President, FHRAI, told news agency PTI.
The hotel and restaurant association has also suggested that this linkage should be removed or alternatively the benchmark or the threshold of Rs 7,500 should be moved to 12,500 having due consideration to the inflation since 2017 when for the first time this benchmark of Rs 7,500 was set.
(With inputs from PTI)
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