Hoteliers in the western region, under the banner of the Hotel And Restaurant Association (Western India) – HRAWI, have urged the government to de-link the GST applied to restaurants within hotel premises from that on rooms. They argue that this adjustment would reduce the current GST rate of 18 percent on food and beverage services to 5 percent, aligning it with the rate charged at standalone restaurants nationwide.
Expressing concerns regarding the current GST structure applicable to food and beverages served in hotel restaurants, the HRAWI conveyed in a letter addressed to Finance Minister Nirmala Sitharaman that the taxation system in these establishments is tied to room rates. Currently, the sole criterion for imposing a higher GST rate of 18 percent on hotels and their services is if the room rate exceeds INR 7500. The Association has underscored the significant drawbacks of this taxation model for the hospitality sector, stressing the urgent need for GST framework reform for restaurants within hotel premises. They have proposed that restaurants within hotels should be subject to uniform GST rates, akin to standalone restaurants, regardless of room charges.
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“In today’s dining landscape, hotels often attract walk-in customers to their restaurants, but the prevailing system, where GST rates for restaurants within hotels are tied to room rates, creates unfairness, unpredictability and a substantial disadvantage. The sudden jump in GST from 5 per cent to 18 per cent when room rates exceed INR 7500, creates uncertainty for guests and places hotels at a disadvantage. This discrepancy unfairly impacts restaurants operating in hotels compared to standalone counterparts offering similar high-end experiences and cuisine. We have submitted a representation to the Government, underlining the importance of standardized GST rates for all food and beverage services, regardless of their operation within or outside hotels. Our focus is on promoting fair competition and ensuring the sustainability of the industry, with the goal of establishing equal opportunities for all categories of restaurants,” said Pradeep Shetty, president, HRAWI.
HRAWI has highlighted the negative effects on larger hotel chains, which encounter difficulties serving walk-in customers because of the difference in GST rates. Additionally, the Association noted that this inconsistency also impacts banquets, causing confusion and inconvenience for guests.
“This system places an undue burden on restaurants of hotel chains, hindering their ability to meet consumer expectations. We strongly emphasize the need for a competitive environment where hotels can compete on an equal footing with standalone restaurants. Uniformity in GST rates across all food and beverage services is crucial for fair competition and the sustainability of the hospitality industry,” said Shetty.
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