-KH News Desk (cbedit@imaws.org)
The Federation of Hotel & Restaurant Associations of India outlines strategic reforms in Union Budget 2025-26 to boost tourism, attract investments, and drive growth.
The Federation of Hotel & Restaurant Associations of India (FHRAI), recognized as the third-largest hospitality association globally, has presented its strategic recommendations for the upcoming Union Budget 2025-26. FHRAI’s proposals aim to address the pressing challenges faced by the hospitality and tourism sector, one of the country’s critical economic drivers. By urging the government to implement these reforms, the association envisions a future where India’s tourism industry becomes more competitive, attracts higher investments, generates employment, and contributes significantly to the nation’s GDP.
Transforming Infrastructure Status Norms for Broader Accessibility
At the forefront of FHRAI’s recommendations is a plea to grant infrastructure status to smaller hotel and convention center projects with a minimum investment of ₹10 crore. Under the current norms, infrastructure status is restricted to hotel projects exceeding ₹200 crore and convention centers above ₹300 crore. These thresholds exclude smaller initiatives that dominate India’s market and play a vital role in regional tourism development.
The association also highlights another critical barrier: the stipulation that qualifying cities must have populations exceeding one million. Based on the 2011 Census, only 53 Indian cities meet this criterion, sidelining countless towns and villages rich in cultural heritage, natural beauty, and pilgrimage sites. These underserved regions are left without access to favorable financing options, stalling their tourism potential and preventing the country from realizing the full benefits of its diverse travel offerings.
K Syama Raju, President of FHRAI, said, “The hospitality and tourism sector is crucial to India’s economic growth. It provides employment opportunities and generates substantial foreign exchange earnings. However, the sector is currently facing multiple challenges due to restrictive policies and regulations. By granting infrastructure status to smaller projects, streamlining the licensing process, and addressing GST issues, we can help unlock the full potential of this sector. These reforms will create a more competitive and sustainable environment for businesses, which will, in turn, help India position itself as a global leader in tourism. This is an opportunity for the government to align policies with the growing demands of the tourism industry and ensure that India remains a top destination for both domestic and international visitors.”
Rationalizing GST for Global Competitiveness
Another pivotal aspect of FHRAI’s recommendations is the rationalization of Goods and Services Tax (GST) rates for hospitality services. India currently ranks among the countries with the highest GST rates for tourism-related businesses, making it less competitive than neighboring destinations. FHRAI emphasizes that delinking GST on restaurants from hotel room tariffs and revising the rates for restaurants, banquets, and events are essential steps toward alleviating financial strain on the sector.
Additionally, the federation calls for a revision of the “place of supply” rules under GST. The existing rules prevent businesses from claiming input tax credits for services sourced from outside their home state, leading to higher operational costs. FHRAI proposes changes that would allow seamless input tax credit claims across state lines, enhancing operational efficiency and reducing financial burdens on businesses.
Simplifying Licensing and Regulatory Frameworks
The complexity of excise and liquor licensing rules in India poses significant challenges to the hospitality industry. The current system involves high fees and cumbersome procedures, discouraging businesses from expanding or entering the market. FHRAI suggests adopting a streamlined approach similar to the Food Safety and Standards Authority of India (FSSAI) registration process. This would include nominal fees and simplified documentation, fostering an environment conducive to the growth of leisure and entertainment services.
Aligning Policies with India’s $1 Trillion Tourism Vision
The proposed reforms are part of FHRAI’s broader vision to position India as a global tourism leader. The federation asserts that addressing the outlined challenges will help the country achieve its ambitious target of becoming a $1 trillion tourism economy by 2047. The potential benefits of these reforms include:
- Increased Investment: Streamlined policies and improved financing options will attract both domestic and foreign investments.
- Employment Generation: As the sector grows, it will create millions of jobs, especially in rural and semi-urban areas.
- Boosting Foreign Exchange Earnings: A competitive tourism industry will attract more international visitors, contributing significantly to foreign exchange reserves.
Building a Sustainable Tourism Ecosystem
FHRAI’s recommendations underscore the importance of sustainability in tourism development. The association believes that creating a more inclusive infrastructure policy and simplifying regulatory frameworks will encourage investment in emerging tourism destinations. This approach will not only enhance the visitor experience but also ensure long-term benefits for local communities and the environment.
In conclusion, the Federation of Hotel & Restaurant Associations of India has presented a compelling case for reforming the policies governing the hospitality and tourism sector. By addressing issues related to infrastructure status, GST rationalization, and licensing complexities, the Union Budget 2025-26 has the potential to unlock unprecedented growth for the industry. These reforms will not only strengthen India’s position as a global tourism destination but also drive economic growth and create a sustainable future for the sector.
