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MoT seeks Five-year tax holiday extension for development of CWG hotels in NCR till July 31, 2010


21 January 2010

HBI Staff, Mumbai:

In order to increase the development pace of hotel rooms before the Commonwealth Games (CWG) to be held in October this year, Ministry of Tourism (MoT) has urged the Ministry of Finance to extend the benefits of the Five-year tax holiday for budget hotels under construction in the National Capital Region (NCR) up to July 31, 2010, instead of the earlier deadline of March 31, 2010.  According to a report in Financial Express, an official from MoT said that looking at the macro-economic situation over the past year, most of the hotels will take a longer time to complete. Extending the Five-year tax holiday will be an incentive for hotels to speed up the process of development and start operations soon, adding to the country’s preparedness for the Games.

The Five-year tax holiday for budget hotels was introduced to attract hospitality chains to build more hotels in the NCR region. However, the economic downturn put a spanner in the development of a majority of properties raising concerns of a shortage of rooms during the Games, which are expected to attract around one lakh tourists from across the world. According to estimates, there is a requirement of around 40,000 rooms in the NCR region to host the guests.

MoT has also urged the Ministry of Finance for non-inclusion of Interstate Passenger Tax, State Road Tax and Toll Tax in Goods and Service Tax (GST). Stamp duty, Vehicular Tax and Toll Tax are part of the exemptions demanded by the empowered committee of state finance ministers, which is negotiating the GST rate and structure with the centre. States receive a consolidated Rs 10,000 crore annually from vehicles, according to the estimate of the 13th Finance Commission task force on GST.

Furthermore, MoT has also demanded the restoration of Budget grant to Rs 1,000 crore, which was reduced to Rs 950 crore in the revised estimates of 2009-10. MoT has also reiterated its demand for the revival of 80HHD of the Income Tax act of the tourism sector, which allowed 50 per cent of the profits earned from the services provided to the foreign tourists, to be exempted from tax and further 50 per cent of the profit also exempted if it was invested in the tourism sector. This benefit was discontinued from the financial year 2005-06 and the revivals of the benefits would set a path of growth for building up much needed tourism infrastructure in the country.