Lead Story

Property tax bogey for budget hotels in Rajasthan

Sanjeev Bhar - New Delhi

At a time when hoteliers across the country are seeking a rationalisation in the tax structure, the Rajasthan Government's decision to levy a new property tax is seen as a step backward.

The state government has recently announced a new property tax, which will impact budget hotels, one, two and three-star hotels, and guest houses, apart from other premises under commercial and public sector undertakings, corporations and boards. This tax imposition is on the heels of the abolition of the house tax earlier this year by the government.

The hospitality industry is apprehensive about this step, given the inclusion of the budget segment under the property tax purview. Commenting on this, Patu Keswani, CMD of Lemon Tree Hotel Company, says, "This is inexplicable. Budget hotels are very cost sensitive. At this time when land cost is a big hurdle to development, levying tax would be a big deterrent. Any additional cost is discouraging for hotel development."

An official from the Department of Tourism, Government of Rajasthan, defending the move stated that investments in hospitality would not stop pouring into the state, despite the imposition of this tax. "Moreover, last year we received Rs 1000 crores of investment, primarily in the hotel sector, especially in the 3-star and below categories," the official added. Senior officials did not respond to queries from Express Hospitality on the issue.

Over the past few years, realty prices in the state have risen sharply. Furthermore, the state of Rajasthan launched a new hotel policy, a first in the country, and urged hotel majors to invest. Teekendra Sisodia, GM of Comfort Inn Hawa Mahal, Jaipur, remarked, "With this move, the tax so imposed will get transferred to customers. This should be avoided to encourage tourism. Taxes need to be paid but this category faces constraints in operations due to mounting costs. We are, in fact at par with the luxury segment when it comes to power and water charges."