The Hotel Association of India (HAI) has raised concerns over recent changes to the Goods and Services Tax (GST) framework, cautioning that the removal of input tax credit (ITC) could stall growth and investment in the hospitality sector.
While the government’s move to simplify GST slabs and lower the rate on budget accommodations is expected to bring some relief to travelers, industry leaders argue that the absence of ITC offsets these gains. “The reduction of slabs was much needed and is welcome. The lower 5% rate for rooms priced up to ₹7,500 will help consumers, but the removal of ITC may prove detrimental to hotel operators. Without ITC, investment and expansion in this critical sector could be discouraged,” HAI stated, urging the Finance Ministry to retain the 5% rate while reinstating ITC.
The reforms are expected to benefit budget and mid-scale hotels, making accommodations more affordable and providing a timely boost to domestic tourism ahead of the festive season. However, HAI believes a higher slab adjustment could have driven greater demand, stronger investment, and increased government revenue.
Hotels play a pivotal role in India’s tourism ecosystem—identified as a key pillar in the nation’s Vision 2047 roadmap. The sector not only generates employment and stimulates regional development but also delivers one of the highest multiplier effects across industries. Despite this, HAI points out, hospitality continues to be treated less favorably compared to other consumption-driven sectors. With hotel restaurants remaining at existing tax rates, the overall benefit for the industry remains limited.
One potential silver lining is that savings on essential goods may increase discretionary spending on leisure and travel, indirectly benefiting hospitality. Prime Minister Narendra Modi has emphasized that the broader aim of the GST reforms is to spur household consumption, which is expected to lift the economy overall.
Still, HAI underscores that addressing industry-specific concerns is critical for sustainable growth. As India positions itself as a global tourism hub, especially for the lucrative Meetings, Incentives, Conferences, and Exhibitions (MICE) segment, the association has reiterated its commitment to continued dialogue with the government. Its goal: to secure a rationalized GST structure that recognizes hotels as essential infrastructure rather than as a luxury sector, ensuring their full contribution to India’s GDP, job creation, and global competitiveness.
