Uttarakhand hospitality gets a breather
The Centre recently exempted the hospitality industry in the flood-ravaged Uttarakhand from Service Tax till March 31, 2014. speaks to industry stalwarts of the region to understand the advantages and disadvantages of the sops.
The Government should have provided relief to the industry for a longer period The State Government should bring us at par with other hillstates like J&K and Sikkim The Govt. has to be aggressive to promote growth and create the support system to maintain it further
MEGHA PAUL The floods and landslides on June 16 had caused extensive damage in Uttarakhand and adversely affected the life of the people in the state. The Centre recently exempted the hospitality industry in the floodravaged Uttarakhand from Service Tax till March 31, 2014. “There is a need to provide support for the local population by reviving the hospitality industry,” the Central Board of Excise and Customs (CBEC) said in its ‘ad-hoc exemption order’. In the wake of circumstances of exceptional nature, the CBEC said it has been decided to exempt taxable ‘services by way of renting of a room in a hotel, inn, guest house, club, campsite or other commercial place meant for residential or lodging purposes.’ The levy on ‘services provided in relation to serving of food or beverages by a restaurant, eating joint or mess’ has also been
exempted.
According to SM Shervani, President, FHRAI; the occupancy in hotels of the state came
crashing from 90 per cent to below 20 per cent overnight after TV channels aired footages of the devastation in Uttarakhand. Thus, the recent step to exempt the hotels from service tax is surely a welcome step. “While it would take another three to four years for the affected areas to rebuild infrastructure, I wish the government had provided relief to the industry for a longer period to enable them to sail through bad times,” he pointed out.
The state government should reduce Luxury Tax and VAT for at least five years. The Central government should also offer tax exemptions on Leave Travel Allowance (LTA) for employees who choose to vacation in Uttarakhand, he added.
Praveen Sharma, Joint Honorary Secretary, HRANI feels unlike the Central Government; the State Government has not been that encouraging. “The State Government cannot wait till the Budget, which will be out only in March next year. There has been no exemption on entertainment tax, luxury tax and VAT and this is still hampering the industry. At least, the State Government should bring us at par with other hill-states like Jammu & Kashmir and Sikkim. In
J&K, there is zero luxury tax while Sikkim has luxury tax as low as four per cent. The VAT in both the states is just four per cent,” he said, continuing, “Tourism is a very delicate business and tourists always have many options – if they don’t come to Uttarakhand, they will go to Kashmir. Thus, we still lose business to these states.”
SP Kochhar, President, Hotels and Restaurants Association of Uttarakhand asserted the tourism and infrastructure facilities in the state are deteriorating and “no major steps have been taken to rectify or rebuild the infrastructure”. Good connectivity in terms of roads, rail capacity and airfares are the biggest obstacles in the growth of this state as a tourist destination. Problems
The step to extend the period of repaying the loan to one year is another welcome step The service tax exemption was from Sept 17 to Mar 31. Real business starts coming in only from April 1
such as water supply and food preservation are also big concern for hoteliers, Kochhar added. “A guest needs to enjoy and spend time in a leisurely mood. There is no entertainment facility, but entertainment tax is as high as 30 per cent, VAT on food is 13.5 per cent and luxury tax varies from five to 10 per cent (depending on tariff), plus service tax of 5.16 per cent on room rent. There is no parking facility, no support of state government in tourism destination advertisements. Moreover, trained staff and friendly atmosphere is the need of the hour. The government has to be aggressive to promote growth and create the support system to maintain it further,” Kochhar, who also owns Madhuban chain of hotels in the state, lamented.
Opined Vibhas Prasad, Director, Leisure Hotels, “Post the calamity, we saw business vanishing not only from Haridwar and Rishikesh, but also from the unaffected areas like Mussorie and Nainital. The Central Government has taken two steps to mitigate the damage. Firstly, they have given the hoteliers an exemption of luxury tax for the next six months. Secondly, a one-year moratorium on bank loans of hoteliers in Uttarakhand has also been provided. A lot of people had taken bank loans before the tourism season for construction and renovation with the hope that they would be able to repay the same. This step to extend the period of repaying the loan to one year has been another welcome step. These two steps are ‘baby steps’ by the Central Government, but in the right direction.” As pointed out by Sahil
Gulati, Director- Operations, EllBee Hotels, the exemption of service tax for six months is just a short-term gain. “The service tax exemption was from September 17 to March 31. This anyways is the lean season. Real business starts coming in only from April 1. And the scheme will not be applicable then, which is unfortunate. The government should have extended this sop for at least a year for us to reap benefits. Rather than giving discounts, it is important that the government boosts the region.” The State Government could also direct PSUs to conduct its meetings and seminars in Uttarakhand. This can help in long-term growth of the state, he suggested.