GST Reforms Leave Hospitality Sector Seeking Relief and Growth

Team L&M

The Hotel Association of India has stated that hospitality sector has once again been ignored in the current GST reforms. The structural reforms, including reduction of the number of slabs were a need of the hour and are welcome. The rate on hotel accommodation priced at ₹7,500 and below from 12% to 5% may provide some relief only to the travellers.

But, the removal of ITC may, in fact, prove detrimental for hotel companies operating in the segment and may act as a disincentive for much needed investment and expansion in the category; the full impact on hotel operators will depend on the effects of the ITC reduction, which experts will need to assess further.

It would prove to be beneficial to retain the rate at 5% whilst allowing ITC, and we urge the Finance Minister to consider this progressively.

Budget and mid-scale hotels are likely to benefit thereby providing for cheaper hotel rooms for consumers and provide a timely boost to domestic tourism as we approach the festive season, we are of the belief that an upward adjustment of the slab could have generated more demand, more investment and increased revenues for the government.

REMOVAL OF ITC BENEFITS MAY HURT INDUSTRY

Hotels provide essential infrastructure for tourism. The country recognises tourism as a key pillar of the economy and India’s vision for 2047. Hotels generate jobs. They strengthen the region’s socioeconomic fabric. They also deliver a high multiplier effect. However, policymakers have once again left the industry behind. This is in comparison to other consumption-based sectors. Hotel restaurants continue at existing rates. As a result, the overall change for the sector remains limited.

Against this backdrop, one positive development stands out. Savings on essentials may increase discretionary spending. This could benefit leisure and hospitality. It may also support broader economic growth.

As the Prime Minister highlighted, the objective is clear. The aim is to boost consumption expenditure. This focuses on items that affect the common person. The broader impact of these cuts will be positive. They are likely to benefit the economy and the nation.

However, addressing industry-specific concerns is crucial. It will ensure holistic growth across categories. It will also help attract investment. The sector can then contribute meaningfully to India’s GDP, jobs and global competitiveness. This is especially important for MICE.