24.02.2024: Hotels demand 5% GST for restaurants operating from within the premium hotel premises

The hoteliers across western region under the banner of Hotel And Restaurant Association (Western India) – HRAWI have urged the government to de-link the GST levied on restaurants operating from within the hotel premises from that on the rooms. This, they said, will bring down the existing GST of 18% on food drink services to 5% which is charged across any standalone restaurant in the country.

Raising concerns over the existing GST structure for food and beverages served in restaurants within hotels, the HRAWI in its letter to finance minister Nirmala Sitharaman said the taxation format in restaurants is linked to room charges. Presently the single criteria for levying higher GST of 18% on hotels and its service is that the rate of room should exceed Rs.7500. The Association has highlighted the significant disadvantages of this tax format to the hospitality industry, emphasizing the pressing need for reform in the GST framework for restaurants operating within hotel premises and has suggested that restaurants inside hotels, like standalone restaurants be levied uniform GST rates, irrespective of room charges.

“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 Rs.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 underscored the adverse impact on larger hotel hotel chains, which face challenges catering to walk-in customers due to the disparity in GST rates. The Association further pointed out that the disparity affects banquets as well, leading to 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.

Source: The Times of India 

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