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Hospitality Industry seeks tax relief, Infrastructure status and financial assistance from Budget 2022-23

Monday, January 31, 2022, 16:07 Hrs  [IST]
Asmita Mukherjee | Hyderabad

With the Union Budget due to be presented on 1 February, people are eagerly waiting for Finance Minister Nirmala Sitharaman to announce benefits and exemptions for industries affected due to the ongoing coronavirus pandemic. The hospitality sector is amongst one of the worst hit industry, which is looking for incentives and lower taxes from this budget. The industry is hoping to get some major incentives that can help revive the sector amid the continuing coronavirus pandemic. According to IANS, the hospitality sector has also appealed to the government to bring the infrastructure status threshold to INR 10 crore per hotel. Presently, the threshold is INR 200 crore. We spoke with industry experts and their expectations from Budget 2022.

According to Vineet Verma Executive Director & CEO, Brigade Hospitality, “Hospitality & Tourism sectors have been the worst affected during this pandemic. The impact has been widespread and unfortunately expected to be long lasting. While both the Centre and State governments have tried to extend their support to some extent, the sectors need more long term resuscitation measures in order to get back on track. Reduction in GST rates to help boost larger spends, according Infrastructure status to hotels, lower interest rates on borrowings, reduction in property taxes, partial if not full waiver of other licence fees including Liquor licences, lower power tariff, are some of the boosters that our industry so desperately needs at this point of time.” 

Speaking on the same, Sibasish Mishra, Founder CEO, BookingJini, a hospitality-focused SaaS platform said, "The hotel business was on the recovery path thanks to domestic tourism, leisure, and events, only to be thrown back into uncertainty by the Omicron threat. It is vital to safeguard the industry during such prolonged periods of uncertainty in business prospects. We interact with hundreds of hoteliers every day, and we've discovered that the industry's main goal is to give hotel owners the status of 'Infrastructure,' since this will solve a large number of the challenges that hotels and hospitality firms face. The step will also help the industry's operational survival and encourage investment in the sector. Access to funding, extended repayment periods for loans, and the resulting reduction in the gestation period will make hotel investments more enticing and sustainable. More hotels would lead to more jobs and growth"

Krishna Kumar, Co-founder- Isthara Co-Living, spoke briefly about his  budget expectations for the co-living and rental accommodation industry, "With office and colleges set to resume in the coming year, we believe that the co-living and rental accommodation sector should be a key priority in the budget. Currently, the regulations that co-living operators are required to follow are in accordance with the hospitality sector. We hope that the co-living sector, which is enabling the country to get back to normalcy by offering migrating students and workforce an efficient housing solution, gets accredited as a residential service provider instead of a commercial service provider.

 

On the lines of the Model Tenancy Act launched earlier, we look forward to additional policy measures that can institutionalize the largely fragmented rental accommodation sector. A provision for additional flexibility in the terms of institutional rent agreements, and additional incentives for developers to build rental housing for co-living purposes can go a long way in strengthening the sector that is set to play a big role in providing efficient accommodation solutions for a growing millennial population.

 

We hope that the budget also introduces measures focused on curbing inflation and strengthening customer purchasing power, which will enable a stronger consumption pattern. These inflationary trends can lead to a rise in food prices, other ancillary services, as well as increase the operating dynamics of the co-living operators, which will directly impact the customer purchasing power and lead to a rise in urban cost of living. We are also hopeful of policy measures focused on augmenting and expediting urban infrastructure projects and residential property development, which will act as a strong catalyst in driving the co-living sector in urban areas."

"Past year has been a journey to revive the economy and we are optimistic that this year we would see increased demand of products. In order to be meet the overgrowing demand, we would like this year's budget to help us in getting the production cost lowered along with deduction in taxes charged on raw materials like crops, oil, and machinery."  Vikram Agarwal, Managing Director, Cornitos.

Sarbendra Sarkar, Founder & MD, Cygnett Hotels and Resorts expresses  his views for the upcoming union budget by saying, "It’s well known that the hospitality sector has been one of the most impacted industries because of COVID. Before the Omicorn hit us, we were steadily getting back on track. However, the sector has again been badly hit and there are several hospitality companies, especially small and medium enterprises, who are in distress. It would be good if the budget provides the industry with structured assistance so that the industry can get back to functioning at the optimum level and continue to contribute to India’s economic growth and rise."

With inbound tourist arrivals unlikely amidst the pandemic, the industry wants the government to incentivise domestic travels with income tax benefits for a limited period so as to help the hospitality and tourism sector get up again by tapping the pent-up demand for holidays, within the country. Thousands of hotels and restaurants are struggling to stay afloat due to covid impact. Hospitality and tourism industry is struggling to survive in this difficult time.

 Nandivardhan Jain, CEO, Noesis presents few suggestions for the upcoming budget 2022-23.

 

·       A financial assistance package for the remuneration of the tourism and hospitality industry is needed. To pay salaries of various staff as well as their employee provident fund and other medical expenses bared by their employers. This would help retain staff as well as help the business function utilizing minimum resources to run their business.

·       Infrastructure Status for the industry, so that the hospitality sector is able to access capital at lower cost and for a longer tenure up to 20 to 25 years. As hotels are high capex business with a longer gestation period.

·      For Infrastructure, benefits to be provided for lower taxation, utility tariffs.

Recommended a higher depreciation rate for hotel buildings from 10% to 35%. Since hotel building comprises 70% of the project cost and gets depreciation of 10% only.

Capital expenditure in Plant and Machinery is at 15% to add an additional 20%.

·       A single clearance system and digitization and ease of setting up a hotel would help many start a hotel in a seamless manner.

·       A tax relief is also a need of the hour as taxes are high, as it has taken a toll on the industry in the last two years. A reduction in taxes for hospitality would help them stabilize their business for the due course of time.

A change in GST tax structure to flat 5% irrespective of room tariff.

 

 
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