Hotel Industry To Initiate An All Out Protest
Mumbai: Hotel And Restaurant Association of Western India
(HRAWI) has today announced that it will start an all out protest against the
new capital value system for taxation adopted by Brihanmumbai Municipal Corporation
(BMC) with retrospective effect from 2010. This announcement
comes in the wake of Public Interest Litigations filed separately by HRAWI,
East India Hotels Ltd, Taj Group of Hotels, eminent architect, Shri Jashwant
Mehta, and other individuals, associations, hotels and institutions.
Earlier, BMC had replaced property tax computation
from rateable value method – based on rent – to capital value system – based on
the property’s market price. The new system resulted in property tax of both
residential and commercial properties jumping up; creating huge disparity
between new properties and old; widening the difference between commercial and
residential properties; and, introduction of periodic revision to property tax
as against fixed taxes; among other changes.
“To give an example, a hotel like Taj* would have paid
Rs. 27.73 lacs as per the old system. However, a new hotel similar to Taj
coming up in the same area and in the same location will, as per the new
system, be paying Rs. 27.74 crores – a jump of almost ninety times,” says Mr.
Jashwant Mehta who has been studying the issue in depth and has a Public
Interest Litigation pending in the Bombay High Court in the same matter.
Some of the other fallouts of
the new valuations are equally devastating. For one, it would spell the death
of service apartments. By clubbing service apartments with 4 star hotels, the former
will end up paying 5 to 7 times higher taxes as compared to furnished
apartments given on lease in the same location. The difference between the two
is only an addition of services such as house-keeping, maintenance, security,
and the like. This will be in addition to 15 times higher water charges. A
typical one BHK service apartment having carpet area 600 sq.ft., built in 2014
in Juhu area is liable to pay approx. Rs. 3.00 lacs per annum as municipal
taxes as against Rs.60,000/- payable as taxes by a furnished lease apartment in
the same locality and built in the same year.
Star category hotels,
especially those catering to the budget segment are also expected to take a big
hit. Against 0.652% property tax paid by unstarred hotels, 1 star to 4 star
category hotels will have to pay 1.303% taxes. “If we add the user category
factor of 1.00 for unstarred hotels and 1.10 for the star category, the
difference in taxes between star hotels and unstarred ones would be 220%. This
will make operating as a star hotel, especially in the budget segment, totally
unviable. Its consequence on tourism would be disastrous. The quality of
services provided could see a big hit and we may see a drop in mid to high
yield tourists. The difference between unstarred and star category budget
hotels is not in capital value but in quality of service,” says Mr.
Kamlesh Barot, immediate past President, HRAWI.
“The new capital value system provides for a shelter only
to old properties. So the cap of 300% on existing property taxes as payable on
or before April 01, 2010 will not benefit hotels constructed after 2010. They
will see a rise in taxes even in slump years. If, God forbid, we are hit by a
massive economic downturn, we could, theoretically, be in a situation where the
property tax is higher than gross revenues,” adds Mr. Barot.
Another anomaly in the value system based
taxation is that new hotels built between 2010 and 2014 will have a liability
of Rs. 35.43 crores compared to Rs. 27 crores for a hotel of the same value
constructed before 2010. “And, if a similar hotel in the same zone were
constructed in 2014, the taxes would be
64% higher due to increase in Ready Reckoner rate between 2010 and 2013. This
would mean that the tax provision in this case would be a staggering Rs. 58.15
crores. The anomalies are disturbing and will make it very difficult for new
hotels to come up,” says Mr. Jashwant Mehta.
“In 2015, the situation gets worse. The taxes for all
properties will be as per capital value as on April 1, 2015 subject to maximum
of 40% cap over the taxes as payable on April 01, 2010. New properties will be
worse off. For example, if taxes payable by Taj* were Rs.1.13 crores in 2015 a
new property similar to Taj built in 2010 will be liable to pay Rs. 49. 60
crores,” reveals Mr. Mehta.
“Under such conditions it would be completely unviable
for existing hotels to survive or new hotels to come up. Without its
infrastructure, Mumbai is no different from any other B town in India. We have
already filed a Public Interest Litigation in the Bombay High Court. In
addition, we will embark on an all out protest comprising of advocacy at all
levels, representations with concerned authorities and any other measure as may
be warranted,” concludes Mr. Gurbaxish Singh Kohli, Vice-President, HRAWI.
* The example of Taj is given for illustration purpose
only
About Hotel &
Restaurant Association Western India (HRAWI)
The Hotel and Restaurant
Association (Western India) is a 64 years old Association of Hotels and
Restaurants in Western India. Its members include Hotels up to 5-Star Deluxe
categories like The Taj, Trident, Hyatt, J.W. Marriott and The Leela who are
some of the prominent members of our Association. With around 1300 members
across Western India, HRAWI covers Maharashtra, Gujarat, Madhya Pradesh,
Chhattisgarh, Goa and the Union Territories of Daman, Diu &Silvassa is
considered to be the voice of the Hotel Industry. The association is part of
the national body of Federation of the Hotels & Restaurants Associations of
India (FHRAI), located in New Delhi, which was originally founded in Mumbai in
1950 by the late Mr. J.R.D. Tata.
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