If ever there was a time for big bang tax reforms, it is now. The entire hospitality industry has high expectations from the Union Budget 2021, to help revive the sector, which has been amongst the worst hit by COVID-19.
Chief amongst them is that an industry status be granted to the domain. Moreover, Patu Keswani, CMD, Lemon Tree Hotels tells Vinita Bhatia that GST charged on services offered by hotels should be reduced. He also hopes that Integrated Goods and Services Tax (IGST) billing for MICE must be permitted. This will enable companies to avail GST input credit, and incentivize them to spend their annual budgets in Indian cities, instead of foreign destinations.
What kind of tax tweaking are you hoping for in the Union Budget 2021?
In terms of indirect taxes, GST on room bookings should be reduced from 18% to 12% or even lower. This will not only improve occupancy, but also make Indian hotels competitive, and place the sector and in line with other developing/developed Asian economies, where taxation on travel, tourism and hospitality is in the single digits.
Uniform taxation is intrinsic for the industry to flourish, as taxes other than GST continue to be levied on certain items. Bringing liquor under GST will ensure a single tax parameter and eradicate multiple state taxes and duties, which is a benefit that can be passed on to the customer.
How can the government assist hoteliers in increasing their cash flow?
There should also be a relaxation in direct taxes, including reduction in income tax rates for hotels. This will help increase the cash flow of our companies, which can to be utilised to repay debts, meet fixed costs, restore salaries and invest to generate more business.
To enable financing, the government should consider issuing guarantees for loans given to hotel projects, which will also open up flow of credit from banks. Business losses should be allowed to be carried forward for up to 10-12 years instead of the current 8 financial years, given that the unprecedented circumstances brought by the ongoing pandemic have thrown off our growth trajectory by a minimum of 18 – 24 months. A single source license application platform should be made available, and license timelines should be increased from one year to 3-5 years.
What assistance can the government provide for an uptick in domestic travel?
A greater push to visit domestic destinations is essential and stimulus packages for the hotel and restaurant sectors should be announced, to help us not just revive, but thrive. The Tourism Ministry must create and advertise domestic tourist destinations to help increase tourist footfall within the country. In order to boost domestic tourism, citizens should be allowed to avail leave travel allowance (LTA) benefit for hotel stays for a period of two years.
Moreover, IGST billing to the hotels for corporate bookings and meetings, incentives, conferences and exhibitions must be allowed. This will permit corporate houses to avail GST input credit, and encourage them to spend their annual budgets in Indian cities, instead of foreign destinations. Further, tax exemption for consulates should be given as an upfront benefit, rather than a refund process, to promote long stays in hotels and serviced apartments
Can a stimulus packages help the industry recover from the after-effects of the lockdown?
The pandemic and resulting lockdown have hit the country’s hotel and restaurant sectors hard. Even with the relaxation of rules, we have had to incur additional costs to ensure the highest standards of quality and hygiene are maintained for the safety and wellbeing of our guests and team members. Additionally, due to disruption of the supply chain, our cost of procurement and logistics has also gone up.
While costs have increased, revenue has hit an all-time low in this fiscal, and even now the number of travellers remains a fraction of what it was last year. Moreover, with the requirement for social distancing in place, our venue capacities and earning capabilities in restaurants and banquets has reduced.
At this time, we hope that the government extends some stimulus packages to help recover from the after-effects of the pandemic – a request that has been made by the sector often during this fiscal. While the government has rolled out economic relief packages for several industries, the hospitality sector has thus far been absent, and the Union Budget provides an opportunity to address the crisis in the sector and offer some relief
