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Run up to the Budget: Hotel sector
Background
- The tourist arrivals
in India are seasonal in nature with the best period generally being from
September to December.
- Occupancy Rates of domestic
hotels have seen an upward trend in FY 2000-01. Also, due to the seasonal
nature of this industry, Occupancy Rates have gone up substantially in the
third quarter of FY 2000-01.
- The Average Occupancy
Rate (AOR) of four hotels in Delhi viz., The Oberoi, Maurya Sheraton, Taj
Mahal and Taj Palace has gone up to 69.25% in the third quarter of FY 2000-01
against an average of 43.82% in the first two quarters. In Mumbai, the average
AOR of The Oberoi, Taj Mahal and The Leela has gone up to 67.37% in the third
quarter compared to an average of 52.7% in the first two quarters.
- Average Occupancy Rates
(AOR) of domestic hotels on all India basis stood at 52.4% in FY1998-99 and
declined to 51.7% in FY1999-00.
- Average Room Rates (ARR)
have also gone up for most of the Mumbai hotels during Nov-Dec 00. Delhi hotels,
however, have not seen any noticeable rate revision.
- During
2000 total foreign exchange earnings from tourism crossed all previous records
and touched Rs144.08 bn. It was 10.5% higher than the earnings of 1999. In
dollar terms the earnings were US $ 3,282.88 mn, which too was 8.1 % higher
than earnings in the previous year. Tourism emerged as one of the main sources
of foreign exchange earnings during the year after IT and Textiles.
- Total tourists' arrival
in the country during 2000 was 2.62 mn, 5.7% higher than the previous year.
In Dec 00 alone, more than 0.28 mn tourists visited the country.
Pre-Budget
Wish List from Hotel Industry
- Income Tax concessions
available to hotel industry under the Income Tax Act are expiring on 31/03/01.
As per the current provisions of section 80-IB, a hotel which has started
its operations between 01/04/97 and 31/03/01 enjoys a deduction of 30% or
50% from the taxable profits, depending on the location, for a period of 10
years. It has been recommended that this benefit may be extended for a period
of five years starting from 01/04/01.
- Hotel Expenditure Tax
(HET) of Central Government should be abolished.
- If HET cannot be totally
abolished, it should not be charged from foreign exchange paying guests. Foreign
exchange earnings of hotels are equivalent to exports made by the traditional
exporters. As no local taxes are levied on exports, HET should also not be
charged on the foreign exchange paying hotel guests.
- Service Tax should be
abolished for hotels and restaurants which is currently being charged from
them as Mandap Keepers. Hotels and Restaurants are already paying other taxes
like expenditure tax and sales tax on the same bills and services on which
service tax is charged and there is no justification for multiple taxation
from the customers of banquets and conferences in hotels.
- Hotel industry should
be given the infrastructure status under the Income Tax Act, as is available
to ports, power, communications, roads and airports.
- An amendment should be
made in Section 4 of the Expenditure Tax Act which gives concurrent concessions
to certain preferred places which enjoy 50% income tax exemption under sub
section 7(a) of section 80-IB of the Income Tax Act. This Section has placed
a cap of 31/03/01 and 31/03/08 for availing of the concession. This cap of
closing dates should be removed so that all Hotels which come into operation
between the period of 1/04/90 to 31/03/94 and 1/04/97 to 31/03/01 should get
the concession for a uniform period of 10 years.
Key Players
Indian Hotels, East India
Hotels, ITC Hotels, Asian Hotels, Hotel Leela Ventures, Oriental Hotels, Bharat
Hotels etc.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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