The Federation of Hotel & Restaurant Associations of India (FHRAI), the third-largest hospitality association globally, has reiterated its demand for delinking Food & Beverage (F&B) service rates from hotel room tariffs. This appeal was presented during the DG GST Samvad meeting on November 14, 2024, where key FHRAI leaders, including Vice President Mr. Pradeep Shetty, voiced the hospitality industry's concerns.

Currently, the GST on F&B services is linked to hotel room tariffs, creating operational complexities and policy inconsistencies. For hotels with room tariffs exceeding ₹7,500, F&B services are taxed at 18% with input tax credit (ITC), while those below ₹7,500 are taxed at 5% without ITC. This structure has been challenging, particularly for midscale hotels, hampering their ability to dynamically adjust room pricing and manage compliance efficiently.

A Call for Simplicity and Neutrality

FHRAI proposed delinking F&B rates from accommodation charges to simplify compliance, enhance tax neutrality, and foster industry growth. “The current policy deviates from GST’s principles of neutrality and simplicity,” stated Mr. Shetty. “Delinking will empower the industry to adopt market-driven pricing strategies while ensuring operational efficiency and revenue neutrality for the government.”

FHRAI also advocated introducing an 18% GST slab with ITC benefits for standalone restaurants. This move could reduce operational costs and boost tax compliance, further supporting the sector’s growth trajectory.

A Balanced Solution for Growth

By decoupling F&B charges from room tariffs, FHRAI envisions a level playing field for midscale and high-tariff hotels. The proposed changes promise to enhance tax compliance, streamline operations, and enable hotels to respond flexibly to market trends, potentially increasing GST revenues through higher room tariffs.

About FHRAI

Established in 1955, FHRAI serves as the apex body of India’s hospitality industry. Representing hotels and restaurants nationwide, the association plays a pivotal role in shaping the sector’s growth, fostering collaboration with government and international bodies, and advocating for industry-friendly policies.

The hospitality industry now awaits the GST Council’s decision, which could mark a significant step toward a fairer and more growth-friendly tax regime.