FHRAI to meet govt over GST demand notices, seeks ITC reinstatement

The hotel body said retrospective GST demand notices and withdrawal of ITC have created cost burdens for hotels, threatening investments and tourism growth

Top executives from the Federation of Hotel & Restaurant Associations of India (FHRAI) will meet government officials this week to address tax demand notices that hotels across the country have received over underpayment of goods and services tax (GST) for restaurant services at their premises.

 

“We will be meeting government officials in the coming week to address this issue of retrospective demand notices, which run into crores. This is not a case of tax evasion but GST-related ambiguity, which needs to be addressed by authorities. We want to clarify these matters and arrive at a solution,” Surendra Kumar Jaiswal, the newly-elected president of FHRAI, told Business Standard.

 

At the body’s 69th Annual General Meeting held on Saturday, Jaiswal also raised concerns over the removal of input tax credit (ITC) for hotel rooms priced under ₹7,500, for which GST rates have been reduced to 5 per cent from 12 per cent earlier.

 

Although the revision is a continued effort to rationalise tax rates in order to benefit consumers, improve compliance, and support growth, it has turned into an added cost for guests and created structural cost burdens on hotels, particularly in Tier-II and Tier-III cities, Jaiswal noted.

 

Almost 90 per cent of the country’s hotels operate below a room tariff of ₹7,500, and are now subject to 5 per cent GST without input tax credit, he highlighted.

 

The withdrawal of ITC has escalated unrecoverable costs on rentals, utilities, outsourced manpower, and capital expenditure, deterring investments and threatening the growth of domestic tourism, he stated, while calling for reinstatement of ITC at the earliest and issuing a clarificatory circular to remove compliance ambiguities.

 

“Our industry is one of the largest generators of employment and a key driver of India’s service economy. Yet, the GST framework without ITC has created inequities that threaten our competitiveness,” he said.

 

The body also raised the sector’s long pending demand for industry status.

 

“We are not seeking concessions but fairness, clarity, and parity. By restoring ITC, addressing copyright ambiguities, and granting infrastructure and industry status, the government can empower hospitality to support the vision of Viksit Bharat 2047 and secure India’s rightful place as a global tourism hub,” Jaiswal added.