Tourism Minister Catherine Martin says that she fought to retain the 9% hospitality Vat rate in Tuesday's budget.
Under the plan unveiled on Tuesday, the lower Vat rate will be extended until the end of February, with no concrete decision made on what will follow, although Finance Minister Paschal Donohoe is believed to be in favour of returning to the 13.5% rate.
Speaking at her department's post-budget briefing on Wednesday, Ms Martin said that she was "conscious" that the lower rate had been vital to the sector's post-Covid recovery.
A reduced 9% Vat rate was introduced to help support the hospitality sector during the pandemic but Mr Donohoe recently sharply rounded on hoteliers over price-gouging customers at a pre-budget meeting.
He told hospitality representatives that the Government had provided strong supports for hotels in recent years, which had helped them through Covid-19.
The lower rate had been introduced in 2011 in a bid to stimulate the economy during the last financial crash.
Ms Martin said that there would be "constant engagement" with the sector. She said that while the decision was made by Mr Donohoe, she had sought the retention of the lower 9% rate.
"And I think what was really announced yesterday was the signal that it will run until the end of February and like the Tánaiste said, I think we have to keep everything under review."
Tánaiste Leo Varadkar said that the Vat rate had not been cited to him as the key concern for the sector. He said that the key issue is the availability of staffing.
He told RTÉ'sthat the sector is "under a lot of pressure" and facing a "very difficult winter".
He said that the Government's next move on Vat would "depend on how the situation develops" but accepted that the lower rate may be extended.
The move was criticised within the industry, with CEO of the Restaurants Association of Ireland (RAI) Adrian Cummins saying that the ending of the Vat rate was concerning.
"The 9% Vat rate ending in February of next year will only increase costs for consumers and raises concern about Ireland’s competitiveness compared to our EU counterparts," Mr Cummins said.
Retail Ireland director Arnold Dillon said that the lower rate had invigorated towns and cities.
“It is disappointing to see the reduced Vat rate for hospitality withdrawn. The measure contributed to the development of vibrant town and city centres," he said.
Tax partner at Deloitte Conor Walsh added that the Government's decision would disappoint businesses.
"The decision by the minister to not extend this 9% rate beyond 28 February 2023 will, of course, be disappointing to businesses in an industry where price competitiveness is a core concern," he said.
"Many businesses operating in this industry are facing steep competition, with inflationary pressures mounting. Where future changes are envisaged, these should be balanced against the likely impact to small and medium-sized businesses in the coming years.”