Budget 2014: Hospitality Sector Body for Rationalising Taxes

Ahead of the Budget, the Federation of Hotel and Restaurant Associations of India (FHRAI) has asked the government to rationalise tax structure and provide incentives to mobilise capital investment so as to raise Rs 1.25 lakh crore required to meet the 12th Five Year Plan targets.

In a pre-budget memorandum to the Finance Ministry, FHRAI has said the three key priority areas that need to be addressed include rationalisation of multiple tax structures that affect the sector.

Besides, it has asked for facilitating a broad spectrum of institutional mechanisms by which the hospitality industry, including small and medium enterprises, can access lower cost long-term finance. It has also sought fiscal concessions and incentives to mobilise capital investment.

"The past two years have been a particularly challenging phase for the industry, due to the impact of continued global economic uncertainties and a sharp domestic downturn," FHRAI president S M Shervani said in a statement.

He, however, added, "Despite these adverse headwinds, the long-term potential of India's tourism sector and its strategic role in supporting our country's quest for inclusive growth, remains undiminished."

He said the demands will help "mobilise the massive capital investment of over Rs 1,25,000 crore required to augment the country's hotel room inventory by an additional 1,80,000 rooms, in view of the ambitious targets envisaged in the 12th Five Year Plan (2012-17)".

He further said the government should also facilitate "a broad spectrum of institutional mechanisms by which the hospitality industry, including our small and medium enterprises, can access lower cost long-term finance".

"The minimum project cost mandated for inclusion of hotels in the Reserve Bank of India's infrastructure lending list should be lowered from Rs 200 crore to a more reasonable threshold of Rs 50 crore," FHRAI said.

On rationalisation of tax structure, it said, "Pending the introduction of a unified Goods & Services Tax (GST), hotel accommodation and air-conditioned restaurants should be included in the negative list for service tax."

The same base of room and food and beverages revenue is already subject to the levy of luxury tax and VAT by state governments and the additional imposition of service tax by the central government amounts to double-taxation, it added.

FHRAI also said the GST should subsume, without any exceptions, all central and state-level indirect levies (including luxury tax, entry tax etc) and a composite tax rate applicable to the tourism sector under GST to be capped at 8 per cent.