What is FHRAI’s request regarding GST on F&B services?

FHRAI is urging the government to separate GST on food and beverage services from hotel room rates, allowing hotels to choose their preferred GST structure.

What are the current GST rules on F&B services in hotels?

Hotels with room rates of INR 7,500 or more charge 18% GST on F&B services with ITC, while hotels with lower room rates charge 5% GST without ITC.

What change is FHRAI proposing?

FHRAI proposes giving hotels and restaurants a choice between 18% GST with ITC or 5% GST without ITC, regardless of room rates.

How will this GST reform benefit the industry?

It will simplify compliance, encourage hotels to improve services, allow better ITC benefits for high-end hotels, and potentially increase GST revenue for the government.

GST on F&B Services in Hotels: Proposed Changes by FHRAI

Updated: Aug 20

Hotel lobby scene with two guests checking in at a reception. Green velvet chairs, modern decor, staff in uniforms, and warm lighting.

The Federation of Hotel & Restaurant Associations of India (FHRAI) is urging the government to simplify the way GST on F&B services in hotels is charged. FHRAI believes that separating GST on food and beverages from room rates will ease hotel operations, reduce financial pressure, and improve tax collection.

Why the Current GST System is a Problem

Currently, GST on F&B services in hotels is linked to room rates:

Hotels with room rates of INR 7,500 or more must charge 18% GST on F&B services with input tax credit (ITC) benefits.
Hotels with room rates below INR 7,500 must charge 5% GST on F&B services without ITC.

According to FHRAI, this system is confusing, unfair, and makes compliance more challenging for hotels.

FHRAI's Proposed Change for GST on F&B Services in Hotels

To simplify the GST system, FHRAI recommends a flexible structure where hotel restaurants can choose between:

18% GST with ITC
5% GST without ITC

This proposed change would allow hotels to select the best option based on their business model, regardless of their room rates.

Benefits of the Proposed GST Change

FHRAI believes this reform will positively impact both the hospitality sector and government revenue:

High-end hotels with higher costs can benefit from ITC by choosing the 18% GST option, ensuring stable tax revenue.
Mid-range hotels may feel encouraged to raise room rates above INR 7,500 without GST concerns, improving service quality.
Standalone restaurants with significant expenses may opt for the 18% GST with ITC option, potentially increasing overall GST collection.

Industry Leaders Support the Change

K. Syama Raju, President of FHRAI, highlighted that separating GST on F&B services from room charges will improve tax efficiency and benefit both hotels and the government. Pradeep Shetty, Vice President of FHRAI, added that the current GST structure discourages hotels from raising their room rates beyond INR 7,500, limiting growth.

FHRAI is urging the government to adopt this change to support the hospitality industry and streamline the GST system.