Request to extend tax holiday for CWG hotels

Indian tourism ministry has urged the finance ministry 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. The current deadline is March 31, 2010.

Currently, there are many projects going on in Delhi in preparations for Commonwealth Games. Looking at the macro-economic situation over the past year, most of the hotels will take a little longer to complete.

Extending the tax holiday would be an incentive for hotels to speed up the process of development and start operations soon, adding to the country’s preparedness for the Commonwealth Games.

The five-year tax holiday for budget hotels was introduced to attract hospitality chains to build more hotels in the NCR region before CWG 2010. 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 1,00,000 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.

The tourism ministry has also urged the finance ministry for “non-inclusion of inter-state passenger tax, state road tax and toll tax in GST as a result of which seamless travel and uniform road tax would not be possible”.

Stamp duty, vehicular tax and toll taxes 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.

The ministry 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. The ministry has also reiterated its demand to allow the exemption of 50% of the profits earned from the services provided to the foreign tourists from tax, and further exemption of 50% of the profit it it was re-invested in 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.