Financial Daily from THE HINDU group of publications
Sunday, Jul 13, 2003
Financial Daily from THE HINDU group of publications Sunday, Jul 13, 2003 |
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Investment World
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Industry Analysis Industry & Economy - Hotels Spin-offs from external sources C. Raja Rajeshwari
A few other factors that are not directly in the industry's domain have aided this fortune. The Government, for one, has realised its importance and handed out goodies in the previous two Budgets. It removed expenditure tax, extended the eligibility under Section 72A of the Income-Tax Act to set-off past losses and classified hotels under the infrastructure sector. Airlines have been rationalising their fares and seem set to continue with deep-discount tariffs. This has been instrumental in luring more tourists into hotels. The improvements on the infrastructure front — road and rail, and revamping/building new airports — have increased the convenience of travel, but these are yet to get reflected in terms of enhanced tourist arrivals. The heavy taxation of the industry still hampers growth. Luxury and sales taxes inflate hotel bills, as they are directly passed on to the guests. The effective tax in South-East Asiaworks out to a mere 4-5 per cent, making our rooms uncompetitive, which are subject to about 30 per cent taxes. As these taxes are the domain of State governments, the rates vary. Food and beverages are taxed at a high 23.5 per cent in Maharashtra, even as the luxury tax on rooms is a moderate 6 per cent. This leaves restaurants in hotels at a disadvantage. Tamil Nadu levies a luxury tax of 12.5 per cent, but this is on the rack, not discounted, rate. Karnataka, on the other hand, has shifted from the rack rate concept to an actual rate of 10 per cent, thereby making it easier for hotels. A simplification of rates across States would augur well for the hotel industry. As this is beyond the scope of companies, the Government should take the initiative on this front.
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