FHRAI demands industry and infrastructure status for hospitality industry

Budget 2018, Federation of Hotel & Restaurant Associations of India, FHRAI, Garish Oberoi, GST

The Federation of Hotel & Restaurant Associations of India (FHRAI), India’s apex body for hotels and restaurants, has through a memorandum to the Government of India, for the upcoming Budget 2018, asked for infrastructure and industry status for the hospitality industry for projects worth INR 25 crores and above. FHRAI has also asked the government to keep an uniformity in a flat tax rates at 12% on all categories as a lower rate of 12% will contribute to increase nation’s GDP, encourage tourism-induced employment, across the country. Currently, there are four rates for hotels (0%,12%, 18% and 28%) based on the declared tariff of rooms.
Garish Oberoi, president, FHRAI said, “The tourism sector suffers from a gap in terms of world-class infrastructure development in the country’s tourism destinations. This gap can be bridged by encouraging investments in hotel sector by giving infrastructure status for lower investments. Also, no other nation has a GST rate as high as 28% on hotels and tourism. Charging different tax rates on the nature of accommodation and destination may escalate a perception that India is not a tourist friendly nation.”
Since there are restrictions in place for hotels to be constructed near the beaches and coast lines, FHRAI recommended that permission of construction of hotels be given after requisite environmental and safety norms etc are adequately taken care of.
The memorandum among others also included
• All foreign exchange earnings should be treated as exports or deemed exports if the same would qualify as export/deemed export of services, the credit balance would be available for adjusting GST liability on domestic taxable supplies. Under GST also government should provide the benefit as covered in SEIS.
• Declared tariff should not be basis for rate categorisation. Rate categorisation should be on the basis of transaction value
• FHRAI also recommended that restaurants should be given the credit for input services. Credit on inputs and capital items may be kept restricted.
• On the issue of input credit applicable to hotel industry FHRAI recommended input credit be granted to the hotel industry for any construction activities irrespective of the same being capitalised in books
• The requirement of 75% value should be reduced for both amalgamating and amalgamated company. The time period for which assets should be held by amalgamated company should be reduced from five to two years to make it equal to the requirement for the amalgamating company
• The validity of section 32AC ends on 31 March 2018. FHRAI has recommended that benefit of section 32AC should be extended for another three years. The meaning of eligible companies should be widened to include the companies engaged in operation of hotels. The exclusions from meaning of plant and machinery (such as office equipment etc) should not be applicable for hotel companies.
• With a view to incentivize this staggering investment, FHRAI also proposes that hotels should also be permitted a weighted deduction of 150% under Section 35AD.

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