FHRAI Calls for Key Reforms in Union Budget 2025-26 to Boost India’s Hospitality and Tourism Sector

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The Federation of Hotel & Restaurant Associations of India (FHRAI) has outlined its key expectations for the upcoming Union Budget 2025-26, urging the government to implement reforms that will address the ongoing challenges faced by the hospitality and tourism sector. FHRAI believes such measures will not only enhance investment and employment opportunities but also support the sector’s significant contribution to India’s economic growth.

A key recommendation from FHRAI is to grant infrastructure status to hotel and convention center projects with investments starting from ₹10 crore, down from the current thresholds of ₹200 crore for hotels and ₹300 crore for convention centers. This move aims to make infrastructure benefits accessible to smaller projects, which are predominant in India’s hospitality market. The current requirements, particularly the stipulation that cities must have populations exceeding one million to qualify for infrastructure status, have created barriers for tourism development, especially in smaller towns and emerging destinations.

K Syama Raju, President of FHRAI, emphasized the importance of the hospitality sector to India’s economy. “The hospitality and tourism sector plays a pivotal role in India’s growth, providing jobs and generating substantial foreign exchange. However, restrictive policies and regulations are holding back its potential. By granting infrastructure status to smaller projects and addressing key issues like licensing and GST, we can unlock the sector’s full potential,” Raju said. “These reforms will create a more competitive and sustainable business environment, helping India secure its place as a global leader in tourism.”

FHRAI is also advocating for the rationalization of the Goods and Services Tax (GST) on hospitality services, which is currently among the highest in the world. The association proposes separating GST on restaurant services from hotel room tariffs and restructuring GST rates for restaurants, banquets, and events. Additionally, FHRAI calls for a revision of the “place of supply” rules under GST, which would allow businesses to claim input tax credits for services sourced from other states, thus reducing operational costs and boosting India’s tourism competitiveness.

Further, FHRAI is seeking reforms in excise and liquor licensing, which it argues are complex and come with high fees. The association proposes a streamlined process, akin to the FSSAI registration system, with nominal fees to simplify compliance and meet the increasing demand for leisure and entertainment services.

According to FHRAI, these reforms are critical to realizing India’s vision of becoming a $1 trillion tourism economy by 2047. By addressing the sector’s challenges, India can enhance its standing as a premier global tourism destination, create jobs, increase foreign exchange earnings, and contribute significantly to the nation’s economic growth.

As India positions itself to meet the growing demands of both domestic and international travelers, FHRAI’s proposed reforms offer a blueprint for fostering a more vibrant, sustainable tourism ecosystem.

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