 "Hospitality sector awaits infrastructure status, seeks GST relief in Budget")
India’s hospitality industry anticipates infrastructure status to lower financing costs, rationalisation of goods and service tax (GST) rates to stay competitive with global peers, a digital single-window clearance system for hotel licences and approvals, and measures for increasing the skilled workforce.
Industry stakeholders believe that the full potential of India’s travel and tourism sectors remains untapped. This issue becomes a key focus as India faces a considerable shortage of hotel rooms compared to its global peers.
“The hospitality industry expects the government to grant infrastructure status to hotel and convention centre projects costing Rs 10 crore or more,” said Pradeep Shetty, spokesperson for the Hotel and Restaurant Association (Western India) and vice-president of the Federation of Hotel & Restaurant Associations of India.
Shetty further added that granting industry status and allied benefits to the hospitality sector across the country will amplify the growth of the sector. Such initiatives would help India achieve its vision of becoming a $1 trillion tourism economy by 2047, generating employment and foreign exchange earnings.
According to K B Kachru, president of the Hotel Association of India (HAI) and chairman of South Asia at Radisson Hotel Group, growth in hotel room inventory should be the priority, at least to balance demand and supply challenges. “If we have to achieve 2047 goals, we essentially need international investments.”
Both Shetty and Kachru added that this will provide long-term financing at affordable rates and support small and medium-sized ventures substantially.
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Another key aspect the industry anticipates is the rationalisation of GST for hotels and restaurants, along with a lower GST rate on MICE (an acronym for meetings, incentives, conferences, and exhibitions) for international segments and tourists.
According to HAI, reducing the 18 per cent GST on hotel rooms above Rs 7,500 to 12 per cent will help boost India’s hospitality sector and attract a greater number of international visitors to the country while maintaining a competitive edge over other Asian countries.
Additionally, GST rates for hotel restaurants should be reduced to 12 per cent with full input tax credit (ITC). This will make them competitive compared to standalone restaurants that enjoy a GST rate of 5 per cent without ITC.
“This approach would enable us to offset current expenses, increase capital expenditure, open more restaurants, and ultimately generate more employment and revenue for the government,” said Tejus José, director of operations at ibis and ibis Styles India.
Dhruv Shringi, co-founder and chief executive officer (CEO) of Yatra Online, corroborates José.
“We urge the government to simplify GST compliance for online travel agencies by introducing centralised registration, reducing administrative overheads, and levelling the playing field for Indian players against global competitors.”
Dharamveer Singh Chouhan, co-founder and CEO of Zo World and Zostel, said that introducing public-private partnership models or incentivised schemes to develop new tourist destinations can unlock the untapped potential of many regions. Providing affordable land or tailored schemes for tourism operators could help create more diverse travel options and boost the sector’s contribution to the economy.
Industry experts believe that creating a digital single-window clearance platform for hotel licences, no-objection certificates, and approvals will facilitate the ease of doing business.
The industry is also grappling with a slow recovery in foreign tourist arrival numbers to pre-pandemic levels. According to Kachru, India sends out 3x more tourists on outbound tourism than inbound tourism.
“Investments in Tier-II and Tier-III city infrastructure and a renewed focus on global tourism campaigns, akin to Incredible India, will further drive inbound tourism and balanced regional growth. These measures will empower the sector to emerge as a catalyst for India’s economic transformation,” Shringi added.
According to Avinash Chandani, partner at Deloitte India, the recent depreciation of the rupee against the US dollar gives rise to the risk of a surge in airfares. The government could look at some subsidies or exemptions that can be provided on aviation jet fuel. He further added the need to boost the skilled workforce within the sector.
Rajan Bahadur, CEO of the Tourism & Hospitality Skill Council, said that increased allocation for skill development, apprenticeships, and digital transformation will empower the workforce, ensuring the industry is prepared for future challenges and opportunities.
“While substantial work is already underway in these areas, there is still a road ahead to fully unlock the potential of this dynamic industry,” Bahadur added.