Hoteliers seek tax relief to beat slump

The country's hoteliers and restaurateurs, hit by the economic downturn, coupled with low occupancies, are now seeking a bailout package from the government.

The Federation of Hotels and Restaurants Association of India (FHRAI) has made a presentation to the government, requesting certain tax exemptions.

"We have appealed to the government, asking them to make available certain tax exemptions. We are not asking for any financial assistance as doing away with these taxes would itself be good enough," said S P Jain, president, Pride group of hotels, who is also the president of FHRAI.

FHRAI has asked the government for a waiver of luxury tax and value-added tax (VAT) for the next two years. Hotels in Maharashtra pay the highest VAT of 12.5 per cent in the country. The luxury tax payable is around 10 per cent. Hotels in Gujarat pay a VAT of 4 per cent and luxury tax of 6 per cent.

"Luxury tax is a state subject and all the hotels want it to be waived off. We want the government to charge the taxes on the actual rates being charged and not the rack (printed) rates. Since the hotel occupancy is on a decline, the tariff is high when rooms are given at a lower price," added a hotelier from Mumbai. "We have also asked the government to make funds available to hotels at a lower rate of interest," he added.

"Considering the current economic slowdown and the recent terror attacks, people will avoid visits to restaurants in five-star hotels. This will affect the revenue of hotels from the food and beverage segment, which makes up for around 30 per cent of a hotel's business,'' said a Mumbai-based analyst.

Other proposals include restoration of forex incentive that was available to the industry till 2005 and providing hotels the infrastructure status.

"The industry needs funds to survive. Taxes are too high for us," added Jain.