Uttarakhand hotels feel the pinch of higher taxes

The hotel industry in Uttarakhand is facing a heavy tax burden, with the state government having increased taxes by 300 to 400 per cent within the last four years.

Last year, bar licence fees had been increased from Rs 3.5 lakh to Rs 4.5 lakh for hotels in the one-star to three-star category, and by 50 per cent (from Rs 6 lakh to Rs 9 lakh) for four-star and five-star hotels (category II).

In addition, vend fees for stocks purchased by hotels have also been raised to 25 per cent for retail shops. Besides, the tax on food items has been increased to 13.5 per cent. All these taxes have combined to shrink profit margins considerably, hoteliers said.

Over 100 hotels have been affected by tax increases in the hill state. “The occupancies of hotels in Dehradun, Mussoorie and Nainital have not shown any upward trend after the considerable drop last year. Hotels have not been able to meet their expenses due to the hefty increase in taxes,” said S P Kochhar, president of the Hotels and Restaurants Association of Uttarakhand (HRAU).

According to hotel industry sources, the bar licence fee in Uttarakhand is nine times more than that in Himachal Pradesh.

In its petition before the government, the HRAU said high licence fees would make liquor in the hotels and bars expensive, which in turn would promote liquor smuggling from the neighbouring states.

The association urged the government to lower bar licence fees to the level of the neighbouring states and remove the vend fees, so that the hill state prospers along with tourism activity in future. The association also warned that if the state government provided no relief, then hotels would be compelled to retrench workers.