Hotels push for GST parity with standalone restaurants

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₹7,500, a rate that applies even to guests not staying at the hotel. Since 2018, hoteliers have been voicing their concerns that this tax discrepancy is leading to a loss of restaurant customers, who prefer standalone restaurants for the tax benefits they offer. The industry's stakeholders are pushing for a uniform GST rate of 5% for all dining establishments to level the playing field.

At a time when standalone restaurants are doing exceedingly well around the country, and the competition is already fierce, the hotel industry is questioning why a hotel room rate should have any significance with dining options. Adding to the woes is the increasing tendency of hotel guests to order food from outside delivery services. The GST council's mechanism, which ties the dining GST to the hotel's declared room tariff, puts hotel restaurants at a competitive disadvantage.

For example, a meal costing ₹2,000 at a standalone restaurant incurs only ₹100 in GST, whereas the same meal at a hotel restaurant would attract ₹360 in taxes. The situation is exacerbated for mid-market hotels where customers are particularly price-sensitive. Hoteliers argue that the initial GST framework may have been predicated on the assumption that hotel clientele were less price-conscious, and would be able to absorb the higher cost.

“Hotels invest a lot of capital in creating food and beverage facilities…Charging a higher GST of 13% on the hotel restaurants is not fair…Due to this difference, the customer perceives hotel restaurants to be more expensive and seeks dining options outside of the hotel including takeaway. This situation requires a correction. GST rates have to be de- linked from hotel room tariffs," said KB Kachru, vice president, Hotel