With the introduction of the GST bill by the Government of India, every sector has set their eyes keenly on the percentage which is yet to be finalised. India has now emerged as one of the hub for hospitality development, globally. To further boost this segment, The Federation of Hotel and Restaurant Associations of India (FHRAI) has recommended the highest rate of GST to be set at five per cent.
Speaking about the issue, Bharat Malkani, President, FHRAI said, “High tax regime is a disincentive for tourists to come to India. Our hotels charge taxes from 18 per cent to 26 per cent. Globally the upper limit is five per cent. This gap has brought our inbound tourist arrivals to a paltry two million, while outbound is 24 million. Even Indians prefer to take holidays abroad as they are cheaper. The FHRAI has recommended that the highest rate of GST vis-a-vis our competing neighbours namely UAE, Thailand, Hong King, Sri Lanka, Malayasia and Singapore should be set at five per cent.”
Presently, India with 387 Projects which includes 59,636 Rooms in pipeline is far below in terms of hotel development compared to China’s 2,654 Projects with 554,025 Rooms. Explain the pace of the development of hotel industry in India, Malkani said, “Our hospitality industry is over regulated with multiplicity of licenses and approvals. This makes an already overtaxed industry expensive. Net effect the cost of a good room in our neighbouring countries are almost half that of the price in India. Businesses have been affected in India since 2008. However, there has been a slight positive change since 2016.”
The hospitality industry in India, for a long time is looking to get the industry status. Under the industry status, hotels, motels, resorts, amusement parks, heritage hotel, apartment hotel, motels, convention centers, adventure spots, wayside amenities, tented accommodation, water parks, theme parks, night accommodations will have to pay industrial tax rates which is almost 10 to 15 per cent less than commercial tax which is 25 per cent. Last year, Gujarat was the first state to confer industry status to hospitality. Malkani said, “Some states like Gujarat have given the benefits of an Industry status to the hospitality industry. However, most of the states have not yet bothered to give this basic benefit to the industry. We are hopeful that the Government will make the necessary changes sooner than later.”
Speaking about the challenges which the industry is currently facing, he added, “The list is quite large but common to even our citizens. First and foremost is the state of our road and rail infrastructure. Both are woefully inadequate and need substantial investments. Air travel has improved considerably. Basic cleanliness is another challenge. Indian tourists go to places like Singapore and the first thing they remark is the cleanliness of the city. And amongst all this is the cost of Capital. Although declared as an infrastructure, hotels spending only more than 200 crores can claim this benefit. Everyone else that is the small and medium hotelier has to pay interest rates upward of 12 per cent while our competitors in SE Asia are able to borrow money at three to four per cent.”
In India, the hospitality sector is still considered under the unorganised sector. FHRAI is currently engaging in dialogues with the Central and State Governments to promote the trade in a judicious and sustainable manner. Malkani said, “There are many issues that need to be solved at a local level, which the FHRAI gives support to its members. Importantly, the FHRAI has set up a training institute at Greater Noida which will be a Center of Excellence for Hospitality education of its members and their staff. Our two major thrusts apart from education are rationalisation and harmonisation of the industry standards for environmentally sustainable hotel operations and Food Safety.”
