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How can India be an incredible destination if we levy 18 and 28 per cent taxes for hotels under GST while our neighbours charge just 4 to 7 per cent


Opening a restaurant or investing in a hotel today is nothing short of a gamble. It is like betting on horses as one does not know which government policy might cripple a fast running hospitality business any day and throw it out of race.

A successful establishment serving food and alcohol can suddenly be made to shut shop by a ban on serving alcohol within 500 meters of a state of national highway, municipal department might just shut all the terraces on flimsy grounds or one state government might stop issuing alcohol licenses as its party is fighting state polls in another state on an anti-alcohol plank.

If that is not enough, a government department might instruct you not to levy service charge despite providing impeccable service, advise on portion sizes to be served, teach you which ingredients to keep off your menus or tell you to let your toilets be used as public loos. Some state governments may just completely ban alcohol sending sales crashing and industry gasping for breath.

With a daily risk involved in running a restaurant, an investment in this sector is nothing short of placing a bet. The high risk involved in running a fruitful restaurant with success dependent purely on chance and mood of the judge, official or public representative of the day makes hotels and restaurants a gamble.

Probably, that only justifies levying of 18 and 28 per cent tax on some hotel rooms and restaurants and placing them in same category as race club betting and gambling.

Nothing else explains proposed tax of 18 per cent on hotel room rents of Rs 2,500-5,000 and 28 per cent on those charging Rs 5,000 and above per night. Restaurants in five star hotels will also have to impose similar taxes.

Standalone eateries that have alcohol license and let you wine and dine in an air-conditioned setup will be charged 18 per cent tax. Those without air conditioning will be made to pay 12 per cent tax. The ones with an annual turnover of less than Rs 50 lakhs though will just pay 5 per cent tax.

These tax slabs are proposed by a government that claims tourism to be its priority sector. These taxes are being levied on hospitality industry that is emerging as one of the fastest growing sectors that is generating both jobs and revenues.

This sector is making India an attractive tourist destination that offers services at par if not better than rest of the world. Indian restaurants and hotels have started featuring among the top in the world in popular online polls and critics ratings.

Just when the sector was poised to leap India’s standing as culinary and hospitality giant of the world, one move or other have crippled the sunrise sector over the last year. India is surrounded by countries that thrive on tourism.

One of the biggest reasons why tourists flock South and Southeast Asian destinations is their low taxes ranging from 4 to 7 percent. It is no secret that even an Indian tourist finds a luxury break in Dubai, Bali or Bangkok cheaper than in a resort in Kerala.

In tax proposals for hotels and restaurants, the government has missed a golden opportunity in projecting India as a lucrative holiday destination offering some of the best experiences and affordable yet luxurious stay options. The government too could have stuck to a fixed tourism tax of 5 per cent like many countries than putting in these slabs.

What these proposed tax slabs do is simply make a foreign tourist coming to India opt for a lesser category hotel or cut their stay in a luxury hotel short due to higher taxes provided they do not give India a miss altogether.

These slabs also compel establishments to stay ordinary, serve without air conditioners and alcohol and register lower turnovers to pay lesser taxes. Where the incentive should have been to upgrade street vendors to stand alone restaurants, the slabs seem to be aimed at forcing well established restaurants to operate like dhabas if they want to avoid paying higher taxes.

The government needs to realise restaurant and hotel chains are the poster boys of Incredible India. For a tourist, going to Varanasi ghats, Taj Mahal, Gateway of India and innumerable majestic forts, decent yet affordable stay options are a huge incentive. We may apply as many mud packs to minarets of Taj to return it to its erstwhile whiteness, but if a tourist – Indian or international – does not have affordable yet luxurious stay options around the site, he will simply not visit it.

It is hard to believe that a government so committed to promoting Incredible India would not support the players making India indeed an incredible food and hospitality destination. It is the need of the hour to understand that in order to make in India, you need to make it as lucrative as possible, to first make it to India.

Source: Times of India

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