BackBudget: Don’t want freebies, seek infra status, says Hotel Association
For the long-term development of the sector and for an increase in inbound tourism, the government must move speedily. It must focus on issues of last mile connectivity and developing infrastructure in all segments, and not just the five-star or the mid-scale hotels but across the board
PremiumNew Delhi: With domestic tourism at an all-time high and an impending boost in business from the G20 summit, the otherwise overlooked hospitality industry is expecting some tweaks in the upcoming Union Budget. Hotel Association of India said the industry expects a rationalisation of several taxes imposed on it, including a reduction in GST customers are charged for using hotels in some categories.
Finance minister Nirmala Sitharaman will present the Union Budget for 2023-24 on 1 February.
Under direct taxes, the body has suggested that GST on hotel tariffs and restaurants in hotels must be reduced from the existing 18% to 12% as it affects international competitiveness of Indian hotels. Taxes on hotels in China, Singapore and Thailand range at 5-7% and the only way India will get its intended 100 million foreign tourists would be with such a policy intervention. The association has also sought infrastructure status for the sector to encourage greater “Atmanirbharta" or local investments.
The infrastructure status, the association believes, will ensure easier access to builders of these projects, institutional credit, and help in reducing the development cost of borrowing particularly for affordable projects in all segments (budget to luxury).
The body said that for the long-term development of the sector and for an increase in inbound tourism, the government must move speedily. It must focus on issues of last mile connectivity and developing infrastructure in all segments, and not just the five-star or the mid-scale hotels but across the board.
“We don’t want free goodies from the government, we want them to walk the talk," said KB Kachru, vice president of the association and chairman emeritus and principal advisor, South Asia for the Radisson Hotel Group.
He told Mint that if tourism was a key growth pillar for the economy--since it accounts for about 9% of all employment--then why was it that the industry had still not gotten an infrastructure status.
Suggestions like rationalisation of taxes and tax rates, easy compliance and ease of doing business and policy interventions including moratorium, he said, will boost the long-term growth of the sector, encourage investments and productivity, and create employment.
“If an infrastructure status is granted, then hotels can be given an industry status in states which will allow them further incentives like low tariffs for utilities (electricity & power) which are given to other industries like manufacturing, automobile etc. Licensing and other permits would also become cheaper, easier to get and once the status is granted and executed," said Kachru.
For instance, capital expenditure which comprises 70% of a project’s cost is allowed 35% deprecation in other industries but for hotels, it is 10% at present.
It has also recommended that business losses be carried forward for 12 years instead of the current eight years. “This is the most justified incentive for a sector that supports inclusive growth and has shown the resilience to come out of two years of near-zero business. It will encourage cash flows and reduce the severe liquidity problems caused by the pandemic," he added.
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