The Federation of Hotel & Restaurant Associations of India (FHRAI), the third largest hospitality association globally, has outlined its expectations from the upcoming Union Budget for 2025-26.

FHRAI urges that the government implement reforms addressing critical challenges faced by the hospitality and tourism sector. Such reforms are believed to boost investment, create jobs, and promote economic growth in the industry, which significantly contributes to India’s economy.

FHRAI’s primary recommendation involves granting infrastructure status to hotel and convention center projects costing ₹10 crore and above. The current requirements state that hotel projects must exceed ₹200 crore and convention center projects must surpass ₹300 crore, which limits accessibility for smaller enterprises dominating the market.

Moreover, the existing criterion requiring cities to have populations over one million to qualify presents a barrier to tourism development across India. Only 53 cities in the country meet this population threshold, thus excluding numerous significant and emerging tourist destinations.

K Syama Raju, the President of FHRAI, stated, “The hospitality and tourism sector is crucial to India’s economic growth. It provides employment opportunities and generates substantial foreign exchange earnings. However, the sector currently faces multiple challenges due to restrictive policies and regulations. By granting infrastructure status to smaller projects, streamlining the licensing process, and addressing GST issues, we can unlock the potential of this sector. These reforms will foster a competitive and sustainable environment for businesses, positioning India as a global tourism leader.”

In addition to requesting infrastructure status and simplifying licensing processes, FHRAI also advocates for revising GST rates on hospitality services. As one of the highest in the world, India’s current GST structure renders it less competitive with neighboring countries. Recommended changes include separating GST on restaurants from room tariffs and restructuring the GST rates for restaurants and events. Adjustments to the “place of supply” rules could allow for claiming input tax credits on services sourced from other states, thus lowering operational costs and enhancing the competitiveness of Indian tourism.