HRAWI ORGANIZES SEMINAR ADDRESSED BY SME’S FOR THE BENEFIT OF HOTELIERS & RESTAURATEURS

VAT, Luxury Tax & Service Tax Demystified For The Hospitality Industry

Mumbai: As part of the initiatives taken for the benefit and awareness of hoteliers and restaurateurs, the Hotel and Restaurant Association of Western India (HRAWI) has organized special seminars to understand the impact of VAT, luxury tax and service tax on various activities of hotels and restaurants. The seminars will be organized for Food Business Operators (FBOs) in various cities of the western region including Mumbai, Pune, Bhopal, Ahmedabad, Goa and others in the coming months. The first seminar held at The Ambassador hotel, Mumbai, yesterday received an overwhelming response from the FBOs. The session on VAT and Luxury Tax was addressed by Shri Govind Goyal, a well-known chartered accountant and Mr. Sheel Bhanushali spoke on matters related to Service Tax.

“The hospitality industry is presently gripped by several harsh policies and; direct and indirect taxation that is hurting the sector. It is very important for everyone in this industry to be abreast of changes and developments taking place from time to time. For this, the association has and will continue to organize such seminars in the interest of our members,” said Mr. Bharat Malkani, President, HRAWI.

During the seminar the Subject Matter Experts (SME) highlighted several laws and policies related to VAT, Luxury Tax and Service Tax. This included the criteria under which taxes are applicable and liability classified based on person, event, rate or value. The seminar also discussed the issues of overlapping of taxes besides giving clarity over taxation based on the types of organization viz Star hotels, club houses, small hotels, sweets and farsan shops, bakeries and catering.

Explaining the basics Mr. Govind G. Goyal said, “Unlike in the past, since 01.04.2005 there is no separate Purchase tax, Turnover tax, Resale tax, Surcharge, Works Contract tax, Lease tax etc. There is only one tax now i.e. the Value Added Tax (VAT). VAT is levied on the turnover of sales of goods at such rate as specified in respective schedules that include Essential commodities that are tax free; gold, silver, precious stones, pearls, etc attract a VAT of 1%, declared goods, industrial inputs, and such other specified goods are charged at the rate of 5%; foreign liquor, country liquor, motor spirits, etc. are the ones that may attract VAT at certain specific rates and all other goods are taxed at 12.5%.” Also highlighting the recent revisions made to the Luxury tax he said, “The Luxury tax is not applicable for hotel rooms for a tariff of up to Rs.1000, between Rs.1001 – Rs.1500 at 4% and exceeding Rs.1500 at 10%.”

Speaking about the Service Tax applicable for the hospitality sector Mr. Sheel Bhanushali explained the various services that various hotels provide activity-wise. Based on whether it provides only accommodation or if it’s a casino or a club membership, he elaborated on the taxes an entity would incur.

Providing clarity on the definition of a Mandap and its tax implications Mr. Bhanushali said, “The definition of mandap is very vide in its coverage and covers all immovable properties let out for organizing social, official or business functions. Hotels and restaurants providing facility like kalyana mandaps or marriage halls, banquet halls, conference halls etc. within their premises for organizing any social, official or any business function shall also be obviously included in the coverage of service tax. Therefore the levy of service tax will apply in all such cases.”

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 smaller Hotels up to 5-Star Deluxe categories. The bulk of its members, like any growth economy is made up of budget hotels. With around 1300 members across Western India, HRAWI covers Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and the Union Territories of Daman, Diu & Silvassa, and 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.

STATE BUDGET GIVES PARTIAL TAX RELIEF TO HOTEL INDUSTRY

Mumbai: The Hotel and Restaurant Association of Western India (HRAWI) has welcomed Maharashtra Government’s state budget that has announced partial tax relief to the industry. The hotel industry had been advocating a revision in the Luxury tax for the last few years and has hailed its revision. The new budget proposes exemption of Luxury tax up to Rs 1,000, 4% up to Rs 1,500 and 10% exceeding Rs 1,500. Also, it offers concession in luxury tax for new hotels or expansion of existing ones in B and C zone cities like Thane, Navi Mumbai and Nashik.

Mr. D.S. Advani, President, HRAWI while welcoming the new move says, “the hotel industry had been approaching the state Government at various levels for a revision in the Luxury Tax. The current luxury tax structure was not feasible in today’s scenario and would have negatively impacted tourism growth.”

“As per the previous tax structure, any hotel room with a tariff of above Rs.750/- and up to Rs. 1199/- was taxed at 4% and those above Rs.1200/- was at 10%. We had been requesting for an increase in the threshold limits. Since, a mere Rs.750/- does not justify being called luxury in today’s scenario, HRAWI had proposed that the limit be raised to at least Rs.2000/-. However, it gives us hope that in the near future it will be further rationalized,” says Mr. Advani.

The state budget has also reduced the late fee on VAT return from Rs. 5000/- to Rs. 2000/- for delay of up to one month and the turnover limit for registration under VAT has been increased from Rs. 5 lakhs to Rs. 10 lakhs.

“This is a progressive step adopted by the Government. Small restaurants and hotels will benefit from this move,” says Mr. Gurbaxish Singh Kohli, Vice-President, HRAWI. “But there is a lot more that is needed to give support to the ailing hotel and tourism related industries. It was accorded industry status over a decade ago however the accompanying benefits in subsidies were never passed on to us. For instance, electricity duty charged to Hotels and Restaurants is at the commercial rate of 13% as against the rate of 6% levied on industrial units. Power and water are the major cost of operation in hotels and restaurants. If the Government gives us the due benefits, not only will the hospitality industry grow, but tourism in Maharashtra will also see a big surge,” adds Mr. Gurbaxish Singh Kohli, Vice-President, HRAWI.

One of the sops provisioned in the current budget include the increase in the turnover limit for filing audit report from Rs. 60 lakhs to Rs. 1 crore. “This increase in the threshold limit will certainly bring major administrative relief for businesses such as restaurants but would not bring any monetary benefits,” says Mr. Pradeep Shetty, Honorary Secretary, HRAWI.

“The state of Maharashtra is evenly poised to give a run for its money to power states like Rajasthan, Goa and Kerala. It has all the natural resources. All that is needed is a little support from the Government. Today, due to insufficient infrastructure and high taxes, Maharashtra does not enjoy the same kind of tourist preference as some of the other states. But with positive Government measures we are sure that Maharashtra will become one of the highest ranked states for tourism,” concludes Mr. Kamlesh Barot, immediate past President, HRAWI.