The Federation of Hotel & Restaurant Associations of India (FHRAI) has reiterated its demand to delink the Goods and Services Tax (GST) on Food & Beverage (F&B) services from accommodation charges in hotels. Citing multiple representations made to the authorities, FHRAI has emphasized that the current practice of linking F&B taxation to hotel room tariffs is both unfair and operationally challenging for the hospitality industry.

Under the prevailing GST framework, restaurants within hotels charging Rs. 7,500 or more per room per day are subject to 18% GST on F&B services with input tax credit (ITC) benefits, while those in hotels with tariffs below this threshold must levy 5% GST without ITC. FHRAI has proposed a flexible system allowing all hotel restaurants to independently opt for either 18% GST with ITC or 5% without ITC, irrespective of the room rates.

With the luxury and upscale markets in the hotel sector expanding steadily, FHRAI believes that this will lead to substantial revenue enhancement for the Government. They assert that hotels will not shift to a lower GST bracket to cater to specific markets characterized by luxury and experience.

FHRAI emphasizes the critical advantage of ITC for hotels citing that there are 417 five-star and five-star deluxe hotels in India, all operating multiple restaurants with significant operational expenses. The association believes that midscale hotels currently capping their room rates below Rs. 7,500 may increase tariffs if F&B rates are delinked.

During the discussions, K. Syama Raju stated: “The delinking of F&B rates from accommodation charges is not just a necessary step for the hospitality sector but also a win-win for the government. This move will not result in revenue loss but will actually drive higher GST collections.” Pradeep Shetty added: “We urge the government to take immediate action on this pressing issue. The hospitality industry needs a progressive policy shift.”

FHRAI remains committed to collaborating with the government, the GST Council, and state authorities to ensure an equitable tax system that benefits both the industry and the economy.