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Finance Minister Nirmala Sitharaman (PTI)
Finance Minister Nirmala Sitharaman (PTI)

Budget 2021: Hospitality sector lays out wish list

  • Infrastructure industry status is a measure sought from Union budget
  • In order to boost domestic tourism, citizens should be allowed to avail LTA benefit for hotel stays too for a period of two years

The hospitality sector is looking for pragmatic policies, lower taxes and easier compliance measures in the Union Budget on 1 February.

The Hotel Association of India (HAI), which represents 300 hotels across categories, said the industry has suffered an estimated 90,000 crore revenue loss in 2020. The organized hospitality sector, which is barely 10% of the entire industry, alone has a debt of 45,000 crore.

The association requested the finance ministry to give infrastructure status to hotels with above 25 crore investment, excluding land. Currently, only those hotel projects with investment of over 200 crore get infrastructure status, which limits the benefits to luxury hospitality firms. To enable financing, HAI said the government can also consider issuing guarantees for loans given to such projects which will allow credit flow from banks.

Hospitality is a long-gestation industry, and awarding infrastructure status to a bigger part of the sector will provide easy access to long-term funding of 15 or even 25 years, and lower interest rates, said Shwetank Singh, vice-president, development and asset management, InterGlobe Hotels.

“The amendment in section 17(5) of GST Act and respective State Acts had led to an unfavourable position by denying credit to hotel buildings/structures. This defeats the objective of GST law principles of free flow of credit when the output is in the course of furtherance of business. Therefore, input credit should be allowed on civil structure that will result in an 8-10% savings in overall cost," he added.

HAI also made several recommendations to ease direct taxes, such as lowering income tax rates (nearly 34.94%) for hotels to help increase cash flows. It recommended that business losses be allowed to be carried forward for up to 12 years instead of eight financial years owing to the unprecedented circumstances brought by the coronavirus pandemic. Hotels should be charged power rates applicable to industries.

The industry body said a cut in GST rates charged on services offered by hotels will help. For instance, GST on room bookings should be reduced from 18% to 12% which will improve occupancy and help Indian hotels be more competitive and on a par with other Asian economies such as Hong Kong, Thailand and Singapore, where tax rates ranges from 0 to 7%. GST for restaurants located in hotels where room tariff exceeds 7,500, is currently pegged at 18%. It should be brought down to 12% with full benefit of input credit. Bringing liquor under GST will ensure single tax and will eradicate multiple state taxes and duties, it said. The body also suggested increasing licence timelines from the existing one year to 3-5 years.

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