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The hospitality industry is a multi-billionaire business sector that heavily depends on leisure time and disposable income. Even though the industry has several underlying sectors, customer-centric approach and service remain the common factor in all these segments.
When it comes to India, the country is full of colours, cuisines, ethnicities, activities and more, making Indian hospitality attract people from around the globe. The country has seen significant growth in foreign visitors since the early 2000s. All these reasons have contributed to making India one of the top ten largest tourism economies globally.
The Federation of Hotel and Restaurant Associations of India (FHRAI) said that it had expected the 18 per cent tax category to come under 12 per cent, as that is where it becomes expensive.
The recommendations made to Finance Minister Nirmala Sitharaman for the upcoming Union Budget includes; giving the hospitality industry infrastructure status and classifying hospitality under the RBI infrastructure by lending norm criteria for access to long-term funds to improve the supply of high-quality accommodations and, as a result, stimulate greater domestic and international travel demand.
Currently, hotels built with an investment of Rs 200 crore or more have been accorded infrastructure status. To boost the budget category in hotels, this criterion needs to be lowered to Rs 10 crore per hotel. As a result, hotels will be able to obtain term loans with cheaper interest rates and longer repayment terms. In addition, they urged that the hotel sector receive perks and industrial recognition. The country should designate the hotel industry as an industry, and a fund should be established to cover any fictitious losses. Many State governments have given hotels industrial status; nevertheless, the rewards and advantages that come with being in industry have not been granted to the sector. A higher inflow of both domestic and international tourists will increase demand and, in turn, further boost confidence in capex spending in the tourism industry, contributing to structural employment growth. The lower cost of operations, spread over a longer payback period, will reduce the cost of supply, thereby increasing demand. To pass effective legislation to turn tourism into a national priority, we have also asked that it be added to the concurrent list of the Indian Constitution. All States will be encouraged to harmonize their regulations if the Center declares tourism and hospitality as an industry and places them on the concurrent list.
It will provide improved cooperation between the State and the Center for funding distribution between projects and programs, implementation geared towards the all-round development of the nation’s tourist industry. High-quality brownfield capex and capacity development will greatly benefit from the extension of investment-linked benefits under Section 35 AD to ongoing hotel and resort capital expenditures, which will speed up investment and employment in the industry. Only new two-star hotels and above-category hotels are eligible for this bonus under Section 35 AD.
The Finance Minister of India, Nirmala Sitharaman, is set to present the financial budget for 2022-2023 on February 1, 2022. In this new Union Budget, the hospitality industry in India is seeking lower taxes and incentives. The Covid-19 crisis had a harsh effect on the Indian hospitality network. Since the industry incurred a huge loss, they are looking forward to more reliefs in the new Union budget 2022-23.
A full-blown infrastructure status for the hotel sector and further rationalisation of the Goods and Services Tax (GST) and a Central single window clearance for hotel projects are some of the major expectations from the Budget 2023.
The GST Council in 2019 green-lighted reduction in the rates on the hotel tariffs. The rooms with a tariff of Rs 7,500 and above attract a GST of 18 per cent instead of 28 per cent. The rooms with tariffs between Rs 1,001 and Rs 7, 500 are taxed at 12 per cent.
The 18 per cent GST is still high in this competitive scenario, it would have been better if it was revised to 12 per cent for the rooms with a tariff of Rs 7,500 and above. The industry has been clamouring for infrastructure status for decades. The status will enable hotel projects to have easy access to cheaper debt that is at par with projects in other industries. A reduced capital cost will have a bearing on both the timely completion of projects and their overall financial health.
Lastly, in a bid to fast-track investments, it is recommended to reduce the total number of licenses required to establish a centralized approval system for most common approvals, licenses & permits on an E- approvals basis. These should be granted within a pre-defined time frame or deemed to be approved.”
The budget is expected to include sustainable schemes that will help promote the travel and tourism sector of India.
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