In a bid to propel the hospitality industry to contribute to the country's economic growth, Hotel Association of India has asked the government to rationalise tax structure and grant 'infrastructure industry' status to hotels and other tourism related industry.
In its pre-budget memorandum, HAI said, "The tourism and hospitality industry is showing signs of recovery and an environment conducive to its accelerated infrastructural development and rationalisation of tax structure can enable this core service sector to propel the economy towards 8 per cent growth of GDP."
HAI said to stimulate the growth of hotel infrastructure in the country, it was essential that hotels were recognized as 'infrastructure industries' under Income Tax Act 1961 at par with other sectors like airports, roads and railways.
"Section 72 (A) of the IT act may be extended to hotels to ensure not only effective and optimum use of capital but also to attract FDI in the sector," it said adding all industries except hotels have the flexibility of business reorganisation without loss of tax benefits.
Apart from this, Expenditure Tax Act needs to be amended to exempt hotels from the applicability of 10 per cent Hotel Expenditure Tax in hotels "wherein room charges for any unit of residential accomodation are Rs 3000 or more per day, HAI said.
Pointing at the multiplicity of taxes imposed by the Centre and states on a tourist, HAI suggested replacing these taxes by a single point tax cap, not exceeding 10 per cent of hotel bill of a tourist, and abolishing 10 per cent hotel expenditure tax.
HAI said hotel business was a part of the infrastructure sector and it was essential that depreciation benefit was allowed to hotels under I-T Act at par with other industrial undertaking.
It also sought Income Tax exemption of up to 50 per cent for a period of five years for those hotels, which started operations from April 1, 2001.
