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The Federation of Hotel & Restaurant Associations of India (FHRAI) has pitched for delinking the GST on food & beverage services from accommodation charges in hotels. Citing multiple representations made to the authorities, it emphasized that the current practice of linking F&B taxation to hotel room tariffs is both unfair and operationally challenging for the hospitality industry.

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

Pradeep Shetty, Vice President, FHRAI said ‘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 7500, the GST rate for the restaurant within the same hotel moves from 5 per cent to 18 per cent. So this is the delinking we have requested for’. FHRAI has also suggested that this linkage should be removed or alternatively the benchmark or the threshold of Rs 7,500 should be moved to 12,500 having due consideration to the inflation since 2017 when for the first time this benchmark of Rs 7,500 was set.