UNION BUDGET 2014 - 15

Few Positives, But Overall Fails To Match Up To Expectations Of Hospitality Sector

Mumbai: After raising hopes and conveying optimism in the run up to the Union Budget, the Budget itself has been lackluster from the hospitality point of view and has failed to match up to expectations.

“We had expected that this budget would concentrate on some critical areas like lowering the minimum project cost mandated for inclusion of hotels in the Reserve Bank of India’s Infrastructure Lending List, restoration of the Depreciation amount on hotel building, exemption from deducting tax at source at the rate of 10 per cent on commissions paid to travel agents, exemption from Service Tax and de-liking of taxes with star category of hotels. There was so much the Government could have done, and did not. We are disappointed,” says Mr. Kamlesh Barot, immediate past-President, HRAWI.

The HRAWI felt that while tourism was provided some support, hospitality as a sector was completely ignored. “While we appreciate the government’s commitment to boost tourism, we are at loss to understand why the Finance Minister (FM) has not addressed any of the concerns of the hospitality industry. The FM has set aside Rs. 500 crores for developing 5 tourist circuits in the country but without adequate hotels, the tourists arriving at these destinations will experience a deficiency in quality of services,” adds Mr. Barot.

The association has however expressed that not all the announcements were negative. The industry did also get a few positives to take home. “The budget has allocated generous funds for development of tourist circuits; air, road and rail infrastructure; archeological preservations and defense museums. As had been indicated in the pre-election manifesto for the development of tourism circuits, the budget announced setting aside Rs.500 Crores and has dedicated separate funds for improving facilities at pilgrim destinations, for augmenting national heritage sites and also for the development of archeological sites across India. These will benefit the hospitality sector in the long run,” says Mr. D.S. Advani, President, HRAWI.

The FM also has proposed an international convention centre on PPP mode in Goa, announced E-Visa scheme to be introduced in a phased manner at 9 airports and also set aside 150 crores on women’s safety in cities.

“From the viewpoint of improving and encouraging Foreign Tourist Arrival (FTA) in the country, the FM has made tangible provisions. Introducing Electronic Visa Scheme will definitely reduce the hassles a tourist faces on a visit here and will prove to be a boon in the long term. Besides, gradually expanding this to Visa-on-arrival will be icing on the cake. Women’s safety another sensitive tourist issue that has been addressed. Most importantly, the FM has identified Goa as an international venue considering the vast untapped potential of the state and would mean good occupancy for hotels there,” says Mr. Gurbaxish Singh Kohli, Vice-President, HRAWI.

“The Union Budget includes some innovative measures to facilitate long term financing for infrastructure. The Government has also indicated that Public Private Partnerships will be the preferred mode of undertaking most projects relating to urban renewal, physical and economic infrastructure. Some of these measures should augur well for the industry as a whole,” says Mr. Pradeep Shetty Hon Secretary - Hotel and Restaurant Association Western India.

“Although, the Union Budget has clearly paved way for the development and progress of tourism in India, the hospitality sector that functions as its backbone has been completely neglected. From the several funds and incentives allocated to various projects declared by the government for the growth of tourism, not a single sop was given for betterment of the hospitality sector. But the sector is still hopeful that the government will understand the potential of the industry and provide some support in the coming future,” concludes Mr. Kamlesh Barot, immediate past-President, HRAWI.

HOSPITALITY SECTOR OPTIMISTIC AHEAD OF UNION BUDGET

Mumbai: The Hotel and Restaurant Association of Western India (HRAWI) has announced that it expects the new Finance Minister to present a friendly budget. The sector that has been at the receiving end of rising taxes and other burdens for over a decade now is hopeful that at least some of the recently introduced burdens will be eased out this year.

In the run up to the budget, the association has identified four key parameters that will play a crucial role in the resurrection of the sector. To reduce the burden and help boost commerce, HRAWI has suggested the following:

Infrastructure: Lowering the minimum project cost mandated for inclusion of hotels in the Reserve Bank of India’s Infrastructure Lending List from Rs.200 crores to Rs.20 crores for hotels that have 20 or more guest rooms.

Depreciation: Depreciation on hotel building under Section 32. Hotels were eligible for a depreciation allowance of 20 per cent on their ‘Plant’ (Building) till March 31, 2002. Thereafter, it was scaled down to 10 per cent vide Notification No. 291/2002, dated September 27, 2002. HRAWI requests for restoring the 20 per cent depreciation allowance.

TDS: Under Section 194H, hotels are required to deduct tax at source at the rate of 10 per cent on commissions paid to travel agents. In actual practice, the payments received from travel agents by hotels are net of commission. Subsequently, hotels have to deposit the applicable tax on their own account and later on make efforts to recover the same from the travel agents. Commissions on hotel bookings should be exempt from TDS.

De-linking of Taxes: Every budget either introduces or reduces or increases some tax and links it with the star category of the hotel. HRAWI would like to urge this Government to not link any taxes (past, present and future) to star category.

The hotel industry is presently plagued by several bureaucratic obstacles and the growth trajectory of the overall sector including tourism, is stagnating. The industry has been battling to keep up with the harsh financial burdens brought about by both the central and state governments that include Service Tax – charged by the Central Government, Luxury Tax – charged by the State, Value Added Tax (VAT) – on Food and Beverage, Excise Duty – on Beverages and Octroi Duty - on items imported into the State, among others.

The hospitality industry has high expectations from the new government based on the pre-election manifesto that promised tourism and hospitality to be one of the pivots for economic growth. Tourism plays a key role in socio-economic progress through creation of jobs, enterprise, infrastructure development, and foreign exchange earnings. The new government has acknowledged this and only the outcome of the budget will determine if the tourism and hospitality industry will receive its due.

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.