The Federation of Hotel & Restaurant Associations of India or FHRAI on Sunday pitched for delinking the GST on food and beverage services from accommodation charges in hotels.
Citing multiple representations made to the authorities, FHRAI emphasised 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 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 regard to our request of delinking this particular GST which is the threshold of Rs 7,500 which is there today, as a result of which the moment a hotel sells a room above Rs 7,500, the GST rate for the restaurant within the same hotel moves from 5% to 18%. So, this is the delinking we have requested for," Pradeep Shetty, vice president, FHRAI, told PTI.
The hotel and restaurant association has also suggested that this linkage should be removed or alternatively the benchmark or the threshold of Rs 7,500 should be moved to Rs 12,500, having due consideration to the inflation since 2017, when for the first time this benchmark of Rs 7,500 was set.
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