Hotel and restaurant associations in Andhra Pradesh have appealed to the state government to take up the issue of reducing the Goods and Services Tax (GST) on commercial Liquefied Petroleum Gas (LPG) with the Central Government.
The hospitality industry said the current structure and increased commercial LPG prices have dramatically increased operating costs, causing hotels, restaurants and other food service businesses to suffer.
The hotel industry has said that commercial LPG is one of the most vital inputs to their businesses as it is used mainly for cooking and food preparation. Commercial cylinders are very expensive and GST is putting significant financial pressure on small and medium-sized eateries, many of which are still recovering from the economic impact of recent years.
Industry representatives would like to see GST on commercial LPG reduced to bring much-needed relief to thousands of businesses operating across Andhra Pradesh. A lower tax rate will reduce operating costs, improve profitability, and also allow restaurants to keep the price of menu for customers at the low end.
Over the last years, the hospitality industry has seen increasing input costs due to higher fuel prices, food commodity costs, labour expenses, electricity charges and rent. Commercial LPG is one of the most recurring expenditures for restaurants, hotels, catering services, bakeries and food processing units.
Hoteliers say that unlike domestic LPG, which benefits from a variety of government financing mechanisms aimed at household consumers, commercial LPG is purchased at market-linked prices. So fluctuations in international energy prices affect business operating costs directly.
Industry associations have asked the Andhra Pradesh government to present their concerns in writing to the Centre, which in turn, asked for a review of GST on commercial LPG cylinders. They believe tax rationalisation can help to grow the hospitality industry and business expansion and employment.
The hotel industry plays a significant role in Andhra Pradesh's economy and is a significant part of tourism, local employment, food supply chains, and small businesses. Tens of thousands of people are directly and indirectly employed in hotels, restaurants, catering services, transport companies and agricultural suppliers connected with the food service ecosystem.
The reduction of operational costs could also benefit customers by minimizing the need for frequent menu price increases, they say. Many restaurants have been forced to boost food prices due to rising input costs and that has had a bearing on customer spending and business volume.
Economists note that GST rates are decided by the GST Council, which consists of both Central and State governments. It is assumed that if there is a change in GST rate, the Council will need to consider revenue and other economic factors.
Business groups argue that lowering GST on commercial LPG should be seen as an investment in supporting the service sector rather than a reduction in tax revenue. Better business performance will eventually bring more tax revenue as economic activity, employment and consumer spending increase.
The demand is indicative of wider concerns raised by MSMEs (micro, small and medium enterprises) and is indicative of the pressure in the sector that is continuing to rise operating expenses. Industry bodies have repeatedly called for policy reforms on input cost cuts and cost-cutting to make the business more convenient for businesses.
Fiscal considerations as well as sector-specific support are still an important policy issue. Governments need to weigh the advantages of tax relief against the imperative to keep public revenues stable to pay for infrastructure, welfare programmes and public services.
The hospitality industry has also called for continued dialogue between governments and business associations to address issues affecting the sector’s long-term growth. Representatives said in a statement that constructive engagement would allow for actionable solutions to be put into effect by business and consumers.
In addition to GST rationalisation, industry groups have also advocated for simplified compliance procedures, better tourism promotion, easier access to credit for small businesses and infrastructure development to reinforce the state's hospitality ecosystem.
But the appeal will be taken into account at the time of the state government has not yet announced the policy decision on the industry’s request. However, it will be considered to be discussed with state authorities, industry representatives and the Central Government on matters affecting economic growth and business competitiveness.
As Andhra Pradesh continues to develop tourism, investment and service-sector development, the hospitality industry’s request makes a point of maintaining a policy environment that promotes business sustainability and affordable services for consumers.
Such a proposal will now depend on future discussions at the GST Council. For now, hoteliers are hopeful that the state government will raise those concerns with the Centre and urge for tax reforms that could put an end to financial strain on one of the country’s largest employment-generating sectors.
