FHRAI Calls for GST Rationalisation in Tourism to Position India as a Growth Engine

The Federation of Hotel & Restaurant Associations of India (FHRAI), representing the hospitality industry nationwide, has urged Nirmala Sitharaman, Union Finance Minister and Chairperson of the GST Council, to rationalise GST in the tourism and hospitality sector. The appeal aims to position Indian tourism as a driver of economic growth while bolstering its global competitiveness in line with India’s Vision 2047.

FHRAI welcomed the landmark GST reforms announced by the Prime Minister on August 15, 2025, describing them as reflecting the Government’s commitment to a stronger tax regime, simplified compliance, and sustained growth. Tourism has long been one of India’s most strategic growth pillars, contributing around five per cent to the nation’s GDP, with the potential to double this contribution if supported by conducive policy measures. It remains one of the largest employers, offering extensive opportunities for youth and women, and is recognised for its high multiplier effect, whereby every rupee invested in hospitality yields a return of 3.5 rupees in output, while one direct job in the sector creates an additional 3.2 indirect jobs.

Despite this potential, India’s current GST structure renders the tourism sector less competitive compared with its Asian peers. Countries such as Thailand, Indonesia, Vietnam, Sri Lanka, Singapore, and Malaysia operate under lower tax regimes, ranging from 6 to 10 per cent, which helps them attract significantly larger tourist inflows. In contrast, India’s higher GST structure reduces affordability and weakens its appeal for international travellers.

FHRAI has therefore emphasised the need for uniformity and simplicity in GST to make tourism services more accessible and globally competitive. It has recommended the introduction of a uniform GST rate of five per cent with full input tax credit across all hospitality and tourism services. Such a move would ease compliance and reduce the cost burden for both domestic and international travellers. The association has also called for removing the linkage of GST on food and beverage services from hotel room tariffs, noting that the current linkage creates operational inefficiencies and revenue losses for hotels. Additionally, it has requested that past GST payments be regularised on an “as is” basis to address demand notices arising from earlier ambiguities in the interpretation of tariff values and service classifications.

According to FHRAI, these measures will significantly improve the ease of doing business in the tourism and hospitality sector and allow the industry to realise its full potential. Rationalising GST would not only enhance competitiveness but also align India with global standards, thereby strengthening the country’s standing as a world-class tourism destination.

Commenting on the request, K Syama Raju, President, FHRAI, said, “Tourism is not just about travel—it is a national growth engine with one of the highest multiplier effects in the economy. Rationalising GST is essential for making India globally competitive, affordable for travellers, and attractive for investors. With supportive policy measures, Indian tourism can double its contribution to GDP, create millions of jobs, and play a pivotal role in achieving the Government’s Vision 2047 of a developed India.”

FHRAI reaffirmed the hospitality industry’s commitment to partnering with the Government to strengthen the economy, advance cultural diplomacy, and position India as a global tourism powerhouse. The Federation believes that a rationalised GST will act as a catalyst for growth, unlocking new opportunities for the sector and accelerating India’s journey towards a developed economy by 2047.