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Ministry wishlist for hospitality

The Union ministry of tourism has mooted a 'no tax regime' for the tourism industry for a period of ten years, starting April 1 this year. In its Plan proposal, the tourism ministry wants the tourism industry to be treated on par with sectors like IT, with various fiscal and tax sops to be used to generate revenue, create infrastructure and employment. Under the plan, the profits should not be taxed if 50 per cent of it is routed back into investments in the tourism industry.

There is also a proposal to remove service tax from total cost, which includes capital cost components like hotel, transport charges, guide and entrance fees. The ministry wants service tax to be levied only on services rendered like room services, food etc.

The ministry also wants a uniform luxury tax of five to ten per cent across the country. However, the states continue to tax the industry on the rack rate (published rate) than the actual rate. The ministry is of the view that luxury tax on the published tariff increases the effective rate of tax to 25-30 per cent. The highest rack rate is 12.5 per cent in Delhi, Tamil Nadu, Karnataka and Andhra Pradesh and the effective payable percentage becomes 20-30 per cent. Hence, the budget hotels (up to three-star category) should be levied luxury tax of not more than 5 per cent, whereas, it could be 10 per cent for the four and five-star hotels. The ministry wants special interest subsidy on heritage properties to be provided, while converting it into heritage hotels. The proposed interest subsidy is five per cent for the heritage hotels (75 to 150 years) and 10 per cent for properties older than 150 years.