The hospitality sector is looking for rationalisation and uniformity on taxes and other levies, in different facilities that the hotels offer – across all states and union territories. The government must extend tax holiday from 5  years to 10 years.

Budget Expectations

In the recent past, the hospitality industry has been faced with many situations, ranging from the global economic meltdown to the 26/11 Mumbai attacks and now the swine flu, the hotel industry has had to endure a lot. This coupled with the forthcoming Common Wealth Games in New Delhi – has made the environment very challenging and the task in front of the new government is to take requisite steps to ensure that the hospitality sector sees fast recovery and achieves sustained growth as well. Hence, in the upcoming Budget, the government must consider the following proposals.

Rationalisation of taxes

We seek a rationalisation and uniformity on taxes and other levies, in different facilities that the hotels offer – across all states and union territories. The hospitality industry is taxed at various levels from rooms, food, beverage and banquet facilities. These taxes include service tax, luxury tax which vary from state-to-state and sales tax, among others. The guests get very confused at the varied tax structure of taxes.

We had also petitioned the Delhi government, not only to reduce the luxury tax, but to charge it on applied rate and not the published room. While the recent Delhi budget presentation has seen the reduction in rate from 12.5 per cent to 10 per cent - it remains chargeable on published room rate

Extension of the existing tax holiday

We are seeking extension of the tax holiday from five years to ten years. The extension is sought since the gestation period of a new hotel is of 4-5 years itself. This extends to all categories of hotels spread throughout the country.

We also urge the Government to look at extending this tax holiday for those existing properties, which are taking a total product upgrade/renovation. This would ensure that older properties are up-to-date in design and offer the best to clients.

Granting of infrastructure status

The industry is also hoping to gain the infrastructure status this budget. Currently, hotels fall under the real estate sector and as a result, loans provided by the banks are given at a much higher rate which directly impacts the overall investment in a project. However, granting of the infrastructure status would shift the hospitality sector into the priority list. This would open the door for promoters as they will have easy access to cheaper funds since the interest rates would be lowered. Such a step would provide impetus to the industry in terms of rise in the flow of investments and development of newer projects at a lower cost.

Deemed export benefits