HOTEL ASSOCIATION FEARS RANDOM INSPECTION BY BMC WILL LEAD TO RAID RAJ

Hotel Association Fears Random Inspection By BMC Will Lead To Raid Raj

Mumbai: The Hotel and Restaurant Association of Western India (HRAWI) has come out in strong condemnation of BMC’s decision to conduct random checks at star hotels and Grade – I hotels in the city to inspect their cleanliness and health aspects. The civic body’s health department plans to draw hotels and restaurants for inspection by lottery system and officers will visit respective establishment premises unannounced. Ironically, barring the star category and Grade – I restaurants, the BMC has no such plans for the rest of the hotels and restaurants in the city.

Questioning the motive, the association has opined that this is nothing but a harassment tactic. “If the BMC were really serious about health and sanitation issues, they would be addressing the issue of unlicensed eateries that don’t follow any procedures and prepare food in filthy conditions. The water they use, the storage condition, the constant exposure to dust, the pests that run in and out from these stalls don’t seem to concern the BMC at all. In this context, targeting the Grade – I restaurants and star hotels is curious,” says Mr. Gurbaxish Singh Kohli, Vice President, HRAWI.

The 65 year old HRAWI is one of the oldest and the most efficient industry associations. Asserting a tradition of proactive partnership with the government, it has drawn attention to the long practice of self regulation followed by city restaurants and has stated that the BMC’s decision to pick only star and grade 1 restaurants is arbitrary and illogical. “We have always been compliant to food safety standards and the services have only improved over time. Our families and friends eat at our restaurants as often as guests do. But without a framework or plan, the inspectors will turn up at the busiest time and disrupt normal functioning. Random raids, as we have seen in the past, go on to serve only one purpose, and that is harassment. We hope BMC will withdraw the decision,” said Mr. Bharat Malkani, President, HRAWI.

Mr. Malkani also pointed out that maintaining hygiene standards is the function of Food Safety and Standards Authority of India (FSSAI) and the BMC should be focused on curbing food cooked and sold without adopting any hygiene or health guidelines rather than creating a raid raj.

“Being penalized for forming a vital factor of the organized sector, this discrimination of facilitating the unorganized roadside eateries only shows that we get harassed and victimized as the soft targets,”said Mr. Kamlesh Barot, past president, HRAWI.

About Hotel & Restaurant Association Western India (HRAWI)

The Hotel and Restaurant Association (Western India) is a 65 years old Association of Hotels and Restaurants, representing majority of Hotels and Restaurants across Western India, which covers Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and the Union Territories of Daman, Diu & Silvassa and is more or less considered to be the voice of the Hotel Industry / Fraternity. The four Regional Associations form a part of the “Federation of Hotel & Restaurant Associations of India” (FHRAI) at the centre in New Delhi, which is our parent body. The Association is part of the national body of the “Federation of Hotel & Restaurant Associations of India”, which was originally founded in Mumbai in 1950, by the late Mr. J.R. D. Tata.

“BMC’S NEW CAPITAL VALUE SYSTEM FOR PROPERTY TAX HAS SPELLED DOOM FOR THE HOTEL INDUSTRY”- HRAWI

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.