Covid NEWS | FHRAI requests GST Rationalization for hospitality industry
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The association has suggested of the upcoming meeting of the GST Council to the Finance Minister.
Federation of Hotel & Restaurant Associations of India (FHRAI) suggested consideration of the upcoming meeting of the GST Council to the Finance Minister.
The hospitality sector in the country is engulfed in massive losses and mounting debts due to the Covid pandemic and is undergoing a very gloomy economic situation with no respite to be seen in the near future. Being the first sector affected by Covid -19 and the last to revive, the hospitality sector in the country is waging a battle for its existence today.
The first wave of the pandemic and the unprecedented second wave with very strong ripple effects have destroyed the entire hospitality eco -system in the country which would take many years to recover. Therefore, at this time of deep crisis, some affirmative action from the Government of India can only save this sector from crumbling down. We are sure that a favourable consideration of the following policy measures can go a long way in reviving the tourism sector in the country.
The association has laid down 10 suggestions for consideration.
Suggestion 1
Enhance the threshold limit of hotel room tariff for charging GST @ 18 % to INR 9500/- from INR 7500/-
Justification
Raising of the threshold limit will bring parity of rates between the Rupee and Dollar. While the threshold was fixed at INR 7500/- the exchange rate of Dollar per Rupee stood at 64, but the same reached at INR 73 per dollar today.
Suggestion 2
Enhance the threshold limit for zero GST for hotel rooms from INR 1000/- presently to INR 2000/- per room per day
Justification
This move will boost the lower budget segment, which in turn will encourage more domestic travellers to venture out and thereby promote the tourism sector in a big way. Under the present situation where the foreign travel is restricted, promotion of domestic tourism is the need of the hour.
Suggestion 3
Treat all F&B revenue in a hotel & standalone restaurant as bundled services to be charged GST on the following manner:
a) 5 % composite scheme for units that are not availing ITC
b) 12% GST for units that are availing ITC.
Justification
Simplification of GST rules will lead to greater compliance especially from small units. A mechanism should be in pace to enable the establishments to avail input of GST paid on rent and other GST cost. This will make the businesses more viable.
Suggestion 4
Allow valid GST hotel bills of any state other than the home state of the Individual assessee paid for by digital mode exempt under section 80C for an additional amount of INR 50,000/-.
Justification
The potential additional tax saving of INR 50,000/- will encourage citizens to travel within India. This will give impetus to hotels as well as ancillary industries.
Suggestion 5
To allow IGST billing to the hotels for corporate bookings & MICE.
Justification
This will enable the companies to avail GST input credit which will incentives them to spend their annual budgets in Indian cities other than holiday destinations of South East Asia.
Suggestion 6
Reduction of GST for LPG used in hotels
Justification
Reduction of GST from 18% presently to 5% for LPG cylinders consumed in hotels at par with domestic cylinders, can bring down the operational cost of the hotels which could be further percolated down to the customers.
Suggestion 7
Remove GST for rent payments
Justification
GST for rent payments to be removed for those who are not eligible to claim input tax credit.
Suggestion 8
Refund of unutilized GST credit lying with state governments
Justification
Hospitality establishments must be allowed to get refund of unutilised GST credit lying with state governments which will enable them to get much needed liquidity.
Suggestion 9
Include a new provision in law for immediate refund of GST paid by new hotel projects and existing expansions
Justification
Thiss will reduce the dependence on debt-financing and bank loans as well as enable hotels that are under construction or whose construction has been stalled because of lack of funding or cash flow to complete their projects which otherwise would have become NPAs. This is also important due to the fact that the Covid pandemic has caused delay of more than a year in completion of existing projects.
Suggestion 10
GST to be charged on the receipt of payments only and not on advances
Justification To comply with the law of paying GST on advances received against the events planned in future has become a big trouble for the industry due to sudden cancellation of bookings on account of the surge in infections and Covid related restrictions. The establishments who are already under huge distress have to undergo another set of burdensome procedures to receive the refund.
