The structural reforms, including a reduction in the number of slabs, were the need of the hour and are welcome. Reducing the rate on hotel accommodation priced at ₹7,500 and below from 12% to 5% may provide some relief to travellers. The removal of ITC may, in fact, prove detrimental to hotel companies operating in this segment and may act as a disincentive to much-needed investment and expansion in the category. The full impact on hotel operators will depend on the effects of the ITC withdrawal, which experts will need to assess further. It would be beneficial to retain the rate at 5% whilst allowing ITC, and we urge the Finance Minister to consider this progressively.

Budget and mid-scale hotels are likely to benefit, thereby providing cheaper hotel rooms for consumers and a timely boost to domestic tourism as we approach the festive season. We believe that an upward adjustment of the slab could have generated more demand, more investment, and increased revenues for the government.

Hotels are providers of essential infrastructure for tourism, which has been identified as a key pillar of the economy and of India’s realisation of its vision for 2047. Hotels generate jobs, add to the socioeconomic fabric of the region, and have the highest multiplier effect. It is unfortunate, therefore, that the industry has yet again been left wanting compared to other consumption-based sectors. Hotel restaurants remain at existing rates, so the overall change for the sector is limited.

Against this backdrop, one positive development is that savings on essentials may increase discretionary spending in leisure and hospitality, supporting broader economic growth.

As the Hon’ble Prime Minister highlighted, the objective of this exercise is to boost consumption expenditure on items that affect the common person. The broader cuts will certainly have a positive effect on the economy, thereby benefiting the nation. However, addressing industry-specific concerns is crucial to ensure that the sector grows holistically across categories and continues to attract investment and contribute meaningfully to India’s GDP, jobs, and global competitiveness as a tourist destination, especially for MICE.

HAI remains committed to continued engagement with the government to rationalise the GST structure across all hotel categories and hopes that the sector will be accorded the correct position in the economy, given its key role, and not be viewed as a luxury or elite sector.

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