homehospitality NewsFHRAI appeals for rationalisation of GST rates for complete revival of hospitality sector

FHRAI appeals for rationalisation of GST rates for complete revival of hospitality sector

"The industry is trying to overcome the crisis of over two years and is only trying to make a recovery. At such times, rationalising the GST rates for the industry could make a difference," said Gurbaxish Singh Kohli, Vice President, FHRAI.

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By PTI Apr 28, 2022 8:52:01 PM IST (Published)

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FHRAI appeals for rationalisation of GST rates for complete revival of hospitality sector
Citing high inflation, the Federation of Hotel and Restaurant Associations of India on Thursday appealed to the GST Council to rationalise the GST rates for the hospitality sector. FHRAI has also asked the government to consider simplification of goods and services tax (GST) rules to enable the establishments falling under the hospitality segment to avail Input Tax Credit (ITC).

It has suggested that all F&B revenue of hotels be de-linked from their hotel room tariff slabs and allowed to charge GST at 5 percent without ITC under the composite scheme and 12 percent GST with ITC. "Similarly, for standalone restaurants, FHRAI has asked that two slabs of GST rates be maintained as stated above as was being done in the earlier Service Tax regime," a release said.
FHRAI has sought a reduction in GST on LPG used in hotels and restaurants from 18 percent to 5 percent to bring down the operational costs, which will benefit customers.
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The federation 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. The wholesale price-based inflation rose to a four-month high of 14.55 per cent in March, mainly due to the hardening of crude oil and commodity prices, even though vegetables witnessed an easing of price pressures.
As per the government data released this month, WPI inflation has remained in double digits for the 12th consecutive month beginning April 2021. "Simplification of GST rules will lead to greater compliance, especially from small units. A mechanism should be in place to enable the establishments 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 percent GST without ITC and the other at 10 percent," FHRAI said. It noted that 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, rationalising the GST rates for the industry could make a difference," said Gurbaxish Singh Kohli, Vice President, FHRAI.
FHRAI has also said 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.
"At present, the threshold limit of hotel room tariff with GST at 18 percent is Rs 7,500. This needs to be increased to Rs 9,500. At the time when the threshold was fixed at Rs 7,500, the exchange rate of the dollar per rupee stood at Rs 64, but the same has breached Rs 76 per dollar today. Raising the threshold limit will bring parity of rates between the rupee and the dollar," said Kohli.

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