GST cuts could make Indian hospitality globally competitive: Industry body

Hotel Association of India on Friday said the government's step to rationalise GST slabs has the potential to transform Indian hospitality into a globally competitive force, hoping for a tax rate of 5 per cent with input tax credit across hotels, restaurants, and tourism services.

Welcoming the announcement by Prime Minister Narendra Modi on August 15 to bring next-generation GST reforms that will reduce the tax burden across the country, Hotel Association of India (HAI) said such reforms are essential to position India as a top tourism destination globally.

It will ensure competitiveness vis--vis other international destinations and help in achieving India's goal of attracting 100 million foreign tourists annually by 2047, HAI said in a statement.

"GST rationalisation has the potential to transform Indian hospitality into a globally competitive force. While we welcome the (GST) Council's consideration of a simplified structure, it is equally critical to align tariff thresholds with inflation and global benchmarks," HAI President KB Kachru said.

To position India as a top five tourism destination globally as envisaged, India's competitiveness will have to be enhanced, he said, adding, "the rate of 18 per cent tax for hotels is too prohibitive, increasing hotel tariff to put India's competitiveness globally at risk".

The much-needed broad rationalisation for hotels should be to encourage greater productivity and larger contribution to GDP and to attract urgently needed investments in the sector, Kachru added.

Currently, hotel rooms priced up to ₹7,500 per day fall under the 12 per cent GST bracket, a threshold set 6-7 years ago, HAI said, adding that it has urged the policy makers to review these slabs in line with inflation and raise it to ₹15,000 as tax rates directly influence affordability for travellers and the overall competitiveness of India as a tourist destination.

HAI noted that in a representation to Finance Minister Nirmala Sitharaman, who also chairs the GST Council, it called for a uniform GST rate of 5 per cent with input tax credit (ITC) across hotels, restaurants, and tourism services.

"This will ease compliance, improve the ease of doing business, and stimulate investment and job creation," it said.

The contribution of tourism to creating employment and inclusive growth is well known and, with the right policy intervention, can achieve the goal of contribution of 10 per cent to India's GDP, HAI said.