Hotels, restaurants may lose Rs 2k cr biz due to strike today

Around 10,000-15,000 hotels and restaurants across India set to go on a one-day strike to protest against service tax

On Monday, food lovers across the country are likely find it hard to eat out at a restaurant. Around 10,000-15,000 hotels and restaurants across the country set to go on a one-day strike on April 29 to protest against the service tax imposed on all partly and fully air-conditioned restaurants in the recent Union Budget.

The strike has been called by the Federation of Hotels and Restaurants Associations of India (FHRAI) and Hotels and Restaurants Association, Western India (HRAWI), along with all state level associations in the country, resulting in cumulatively about 15,000 hotel and restaurant members joining the strike.

What's more, industry players estimate a loss of business due to the one-day strike to the tune of Rs 2000 crore.

"The service tax was first imposed on banquets, thereafter on air-conditioned restaurants serving liquor and now it is proposed to be imposed on all restaurants with air-conditioning including partly air-conditioned. Consequently, sales have been adversely affected due to addition of Service Tax over and above the State Taxes, which is leading to double taxation and is making eating out an expensive affair," said Pradeep Shetty, chairman - legal matters sub-committee, FHRAI & HRAWI, and member - executive committee HRAWI.

According to Shetty, the union finance minister P Chidambaram during his budget speech in February had announced that the service tax of 12.36 per cent on 40 per cent of a customer's bill which was earlier imposed on fully or partly air-conditioned restaurants serving liquor will now be extended to restaurants not serving liquor as well.

"We had made representations in March itself. However, the government did not take any steps in this regards. Instead the tax proposal was approved in the Parliament too. Hence, we had to take this extreme step. We will also make further representations since all states already levy value added tax (VAT) ranging from 5 per cent to 14.5 per cent. The service tax will add additional burden on our customers," said Ashwin Gandhi, spokesperson FHRAI and director of Express Group of Hotels.

Apparently, all Hotels namely in 5 star, 4 star and 3 star categories are expected to close down their restaurants.

"However all the hotels, including ours, will keep our restaurants open for in-house room guests. This is probably for the first time in the country's history that all associations from various states, represented by the smallest eating houses to multi-cuisine restaurants, have come together and resolved not to take the additional tax burden," said Narendra Somani, CMD of Ahmedabad-based Bhagwati Banquets & Hotels Limited.

Post strike, the associations are once again going to meet the finance minister as well as other members of the Parliament to seek revocation of the service tax on all fully and partly air-conditioned restaurants.