Federation of Hotel & Restaurant Associations of India (FHRAI) has complained that the recent rationalisation of Goods and Services Tax (GST) rates has increased structural cost burden of small hotels.

Stating that 90% of India’s hotels operate below a room tariff of Rs 7,500, and are now subject to a 5% GST without Input Tax Credit (ITC), the federation called for reinstating ITC and sought an official circular to avoid compliance ambiguities.

 “Our industry is one of the largest generators of employment and a key driver of India’s service economy. Yet, the GST framework without ITC has created inequities that threaten our competitiveness,” said Surendra Kumar Jaiswal, President of FHRAI.

“We are not seeking concessions but fairness, clarity, and parity. By restoring ITC, addressing copyright ambiguities, and granting infrastructure and industry Status, the government can empower hospitality to support the vision of Viksit Bharat 2047 and secure India’s rightful place as a global tourism hub,” he added.

According to FHRAI, the withdrawal of ITC has escalated unrecoverable costs on rentals, utilities, outsourced manpower, and capital expenditure, deterring investments and threatening the growth of domestic tourism, particularly in Tier II and Tier III cities.

On copyright harassment, FHRAI says multiple societies raise overlapping royalty demands, creating unjustified legal and financial pressures on hotels and restaurants. The federation wants the government to define the roles of copyright societies clearly, prevent multiple collections for the same content, and shield establishments from wrongful litigation.

FHRAI is also seeking infrastructure and full industry status for hospitality sector to unlock low-cost credit, encourage balanced regional development, and boost investments in smaller towns and cities. The need for ease of doing business reforms, including streamlined licensing norms and the implementation of a Single Window Clearance System is another demand.

“Hospitality industry, at its core, is not just about hotels, restaurants, and tourism; it's about the people. It is the collective effort of all the stakeholders and contributors that makes the industry unique”, Jaiswal said.

While FHRAI represents over 1 lakh hotels and 5 lakh restaurants nationwide, hospitality sector as a whole provides direct and indirect support to over 60 million livelihoods.