New Delhi, Jan 28: The hospitality industry’s long-standing demand for infrastructure status for hotel and hospitality investments continues to top the pre-Budget wishlist of leading hotel associations and trade bodies. Despite successive governments granting the status partially or selectively under the harmonised list of infrastructure, the sector says the measures fall short.

As a result, infrastructure status has once again emerged as the foremost demand in the industry’s pre-Budget 2026–27 recommendations.

In 2013–14, the then Finance Minister extended benefits under the harmonised list of infrastructure sub-sectors to hotel projects of three-star and above located outside cities with a population of over one million.

The government had also notified similar benefits for mega projects of over Rs 200 crore, excluding land and lease costs, covering hotels of all categories and convention centre developments, with prospective effect for three years.

Since then, the hotel industry has been demanding the removal of caps and riders and the extension of these benefits to all hospitality projects irrespective of capital size, primarily to encourage greater participation and shore up the supply of hotel rooms. The Finance Minister once again considered the proposal in the 2025–26 Budget but restricted it by linking it to the development of 50 new destinations in partnership with states under a challenge mode. As another union Budget approaches, these 50 destinations are yet to be finalised by the tourism ministry.

“We want the government to hasten the process of finalising these 50 destinations,” said KB Kachru, president of Hotel Association of India (HAI), and chairman of the Radisson Hotels Group for India and South Asia. He also wanted the government to extend the infrastructure benefits under the harmonised list of sub-sectors to hotel projects in the “already established destinations” as well, where there is an “acute shortage of hotel rooms.”

Whether it is purely private investments or private-public partnerships, Kachru said that unless investors see RoI (return on investment), investments are hard to come by. “We have to create reasons for investors to invest,” he said, and, therefore, incentives, including full benefits under the infrastructure status is critical for demand-supply imbalance even in established destinations, he said.

The Federation of Hotel & Restaurant Associations of India (FHRAI), the apex body of hoteliers, also demanded the same in its pre-budget memorandum to the government.

“Ahead of the union Budget 2026–27, the hospitality sector is looking for practical policy support to sustain growth and strengthen tourism-led development. The decision to extend infrastructure status to hotels in 50 select tourist destinations was a welcome step, and the industry hopes this support is expanded across India to unlock its full potential,” said Surendra Kumar Jaiswal, president of FHRAI.

Granting infrastructure status to hotels nationwide will help unlock long-term, affordable financing, especially for projects in Tier II and Tier III destinations, heritage towns, and emerging tourist centres. Tax incentives for new hotels and higher depreciation rates can encourage fresh investments and timely upgradation of assets, improving overall service quality, Jaiswal said.

Independent, professional investment information and credit rating agency, ICRA, also called for support for the hospitality industry to maintain its pace of growth, especially for new infrastructure creation.

ICRA expects the upcoming Budget to continue its focus on tourism and infrastructure investments, ease of doing business, enhanced connectivity and accessibility, said Srikumar Krishnamurthy, senior vice president & co-group head, Corporate Ratings, ICRA Ltd. “With supply growth continuing to lag demand, policy frameworks aiding favourable financing terms shall support inventory addition,” he said.

Dinesh Yadav, founder of Jaipur-based luxury resorts and residences developer also pressed for full infrastructure status for hotel and hospitality projects, citing the sector’s long gestation period.

“The industry is experiencing a significant expansion, with the projected CAGR being about 10-11 per cent. This growth is mainly owing to the attraction of domestic tourists, the MICE sector, and the swift advent of experiential travel in Tier II and III destinations,” he said.

“One of the long-awaited measures is to give the whole hospitality industry, rather than just selected parts, the status of an infrastructure,” Yadav informed.

As a capital-intensive sector and business with a long gestation period, the hotel industry also wants the government to incentivise investments by offering tax holidays, as investments are required to happen beyond the traditional metro and tier I cities.

FHRAI, in its pre-budget wish-list, has asked the finance minister to consider a “tax holiday” for new hotel projects and expansions, particularly in smaller towns and emerging tourist destinations. Such incentives, the hotel federation stated, will encourage new investments, accelerate infrastructure creation, and generate employment in Tier-II and Tier-III cities. The association also demanded support for green and energy-efficient hotels through targeted incentives, helping the industry adopt sustainable practices while managing costs.

The industry chambers and trade associations in the tourism and hospitality sector also urged the government to review and rectify anomalies in tax reforms carried out by the government as part of tax rationalisation, whereby hotels with room tariffs up to Rs 7,500 have been put under 5 per cent GST without input tax credit (ITC).

While the union budget does not address GST matters, there must be guidance in the budget to the GST council to make input credit setoffs available to all tourism entities at 5 per cent, observed Federation of Associations of Indian Tourism & Hospitality (FAITH), an umbrella body representing 10 travel trade associations.

“Absence of ITC at the 5 per cent GST increases effective costs for budget and mid-scale hotels, particularly MSMEs,” stated PHD Chamber in their pre-budget wish-list to the government, and, therefore, asked “to restore limited ITC for such hotels to improve cost sustainability.” The chamber also asked for delinking the GST on hotel restaurants from the room tariff to ensure parity with standalone restaurants.

The restaurant industry, which is an integral part of the hospitality and food ecosystem in the country and a major employer of the economy. National Restaurant Association of India, the apex body of organised and branded restaurants in the country, has asked the government to extend industry status to the restaurant business and create a dedicated ministry for the food service industry to support the growth of the sector.

“The National Restaurant Association of India urges the government to review Notification No. 09/2024 on RCM on GST for commercial leases, as it has increased costs for smaller restaurants and MSMEs. We urge to reinstating the SEIS scheme, targeted subsidies on essential inputs, and improved access to debt financing. Additionally, granting industry status and creating a dedicated food services ministry will support growth, sustainability, and employment across the sector, benefiting businesses and communities nationwide,” said Sagar Daryani, president of the association.

The tourism and hospitality industry also wants the government to support the overseas marketing of the brand Incredible India with an increased marketing budget. India’s inbound tourism has suffered significantly in the post-Covid period because of a lack of focus on branding and marketing in the overseas markets. The annual budget for overseas marketing of the Tourism ministry has been cut drastically in consecutive budgets by the government and reduced to a nominal Rs 3 cr in the last budget, leaving no funds for overseas marketing, resulting in complete stagnation in international inbound traffic into India.

“We cannot ignore inbound tourism. We need to market India aggressively,” said Kachru.

Harping on the potential of the sector in foreign exchange generation and job generation, FAITH asked for a “progressive and competitive budget” favouring global marketing. “One of the foremost requirements for Indian Tourism is to have a progressive and competitive budget for global marketing. This has to be deployed for branding, social media marketing of Incredible India,” it said.

In this context, the PHD Chamber also suggested enhancement in allocations for global tourism promotions and branding, including digital campaigns and participation in international travel marts.

“The government should allocate dedicated funds for aggressive marketing and promotional campaigns. Instead of limiting marketing initiatives to participation in travel marts, India Tourism should organise roadshows to influence international tour operators and end tourists,” notes FHRAI in its memorandum.