Pegged on the backfoot by the economic downturn,the hospitality industry is demanding an exemption in luxury tax,value added tax (VAT) and reduction of electricity duty till March 31,2010,to face the challenge.
The Hotel and Restaurant Association (Western India) has,in a memorandum to the state government,said the economic meltdown coupled with 26/11 had seen a 150-20 per cent fall in tourism. It anticipates a further 30-35 drop in demand in the coming year. There is a 40-45 per cent fall in the occupancy of hotels that resulted in a 30-40 per cent loss. Without an exemption or a reduction,it will be tough to tide over the crisis, said S P Jain,president,Hotel and Restaurant Association.
The association feared large-scale unemployment; smaller units would be possibly forced to down shutters. Star hotels provide direct and indirect employment to thousands. The state government has to consider our proposals, it said.
Jain said the crisis would hit the upcoming hotel projects in western India. Indications are that the situation will continue for another year. Nearly 100 restaurants have closed down in Mumbai alone due to high VAT of eight per cent. The situation in Pune is the same,with many small restaurants feeling the heat, he said.
Hotels and restaurants pay electricity duty at the commercial rate of 13 per cent. It has to be brought down to six per cent on par with industrial units. The tariff shock of nearly 200 to 300 per cent will have a cascading effect, said Jain.
On upcoming hotel projects in Pune,the association said many are facing a shortage of funds with banks denying loans Hotels are now included in real estate. The Centre should place us in the infrastructure category, he said.
Room rent Tax Room rent Tax
Up to Rs 199 Nil Up to Rs 500 Nil
Rs 200-1199 4% Rs 500-2,000 3%
Rs 1200 & over 10% Rs 2001 & over 5%
VAT on food and beverages
Category Now Proposed
Normal 12.5% 4%
Comp scheme 8% 1%
Liquor 20% 1% for beer & wine,
8% for IMFL