How is GST without ITC Affecting India's Tourism Sector?
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Synopsis
The recent GST revisions are raising alarm in India's tourism industry, as costs rise for hotels and guests. Surendra Kumar Jaiswal, President of FHRAI, outlines the urgency for ITC reinstatement to protect domestic tourism. Discover how this tax framework is impacting affordability and growth in the hospitality sector.
Key Takeaways
- 90% of hotels operate below Rs 7,500 tariff.
- GST at 5% without ITC increases costs.
- Investment in tourism is threatened by rising expenses.
- FHRAI calls for immediate reinstatement of ITC.
- Copyright harassment needs government intervention.
New Delhi, Sep 27 (NationPress) The latest adjustments in GST rates are part of an ongoing initiative to streamline taxation for the benefit of consumers, enhance compliance, and foster growth. However, this has inadvertently resulted in increased expenses for guests and imposed significant cost challenges on hotels, especially those located in Tier II and Tier III cities, according to Surendra Kumar Jaiswal, the newly elected President of the Federation of Hotel and Restaurant Associations of India (FHRAI).
Approximately 90 percent of India’s hotels are priced below a room tariff of Rs 7,500 and are now liable for a Goods and Services Tax (GST) of 5 percent without the option of Input Tax Credit (ITC).
He emphasized that the removal of ITC has led to mounting unrecoverable expenses related to rentals, utilities, outsourced labor, and capital investments, which deters investment and jeopardizes the growth of domestic tourism.
FHRAI has urged the government to promptly reinstate ITC and issue a clear circular to eliminate compliance uncertainties.
“Our sector is among the largest providers of employment and a crucial component of India’s service economy. Yet, the GST structure without ITC has created disparities that threaten our competitive edge,” stated Jaiswal.
“We are not asking for favors but rather for fairness, clarity, and equality. By reinstating ITC, resolving copyright ambiguities, and granting Infrastructure and Industry Status, the government can empower the hospitality sector to aid in achieving the vision of Viksit Bharat 2047 and affirm India’s rightful status as a global tourism leader,” he added.
In addition to GST concerns, the FHRAI president also highlighted ongoing issues of copyright harassment, where various societies demand overlapping royalties, placing unjust legal and financial strains on hotels and restaurants.
He called on the government to clearly define the roles of copyright societies, prevent duplicate collections for the same content, and protect establishments from wrongful lawsuits.
FHRAI, which represents over 100,000 hotels and 500,000 restaurants across the nation, brought urgent attention to the policy challenges facing India’s hospitality sector during its 69th annual general meeting held here.
Point of View
It is imperative to understand the broader implications of GST revisions on India's hospitality sector. While tax rationalization aims to enhance compliance and consumer benefits, the unintended consequences of removing ITC pose significant challenges. The government must address these issues to secure the industry’s future and support the nation's economic growth.
NationPress
27/09/2025
Frequently Asked Questions
What is the current GST rate for hotels?
The current GST rate for hotels operating under Rs 7,500 room tariff is 5% without the option for Input Tax Credit (ITC).
Why is ITC important for hotels?
Input Tax Credit is crucial for hotels as it allows them to recover some tax expenses, thereby reducing overall operational costs and encouraging investment.
How many hotels are affected by these GST changes?
Approximately 90% of hotels in India operate below the Rs 7,500 room tariff and are directly impacted by the GST changes.
What are the consequences of the current GST policy on tourism?
The current GST policy without ITC is leading to increased costs for guests and hotels, which could deter investment and threaten the growth of domestic tourism.
What action is FHRAI taking regarding GST?
FHRAI is urging the government to reinstate ITC and issue a clarifying circular to remove compliance ambiguities affecting the hospitality sector.
