According to a blueprint prepared by the ministry of tourism, one of the top demands is the inclusion of hotels within infrastructure under the income tax laws at par with airports, sea ports and the railways.
Sources in the ministry reportedly said if this concession is allowed, new projects would be able to get full tax deduction on profits for 10 years.
The industry has also sought a uniform road tax on tourist vehicles. Transporters say tourism is subjected to a great disparity in taxation. A 10-year tax holiday for new hotel projects in the country is another priority of the industry.
The hospitality industry has been demanding infrastructure status. It says that de-linking the sector from real estate would help it to access easier credit. The industry has also sought a special package linking it to small and medium enterprises for priority lending.
At present, the Reserve Bank of India classifies loans to the sector as a commercial real estate exposure, resulting in higher interest rates and non-priority status for financial assistance.
However, analysts said this alone would not be enough to ensure easier access to credit. “Ultimately, bankers would only take a call based on the strength of the borrower and all these things will not necessarily increase the flow of credit,” said an analyst.
Surprisingly, the hotels did not lobby hard enough against the threatened increase in the excise duty on wines and spirits which had been looming in the horizon, perhaps feeling that it was not a major factor in their scheme of things. But privately, the excise officials hint that if the hotel industry had gone through the tourism ministry, preposterous increase in duties could have been avoided.
Earlier this month, the Delhi government increased the excise duty from Rs.150 a bottle to 30% of the Maximum Retail Price announced by the distributors if it is up to Rs.2000 and 20% on the incremental value beyond Rs. 2000, resulting an increase in excise of around Rs. 300 to Rs.800 in general, on mid range fine wines. This will negatively impact the wine consumption in restaurants. Commonwealth Games 2010 are around the corner. The tourist business will be negatively affected with the fine wine prices going up and becoming unreasonable.
The annual budget, called the Union Budget will be announced by the Finance Minister on 6th July. It is not likely to impact the wine duties, though one could dream of the FM bringing it down to the earlier 100% from the present 150% as bounded by the agreement with WTO. Of course, the additional duties which were the bane of contention with WTO were withdrawn at that time in July 2007, but not before giving free reign to the states to charge excise duty to their heart’s content; taxation as excise duty is a state subject.
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