Representatives from leading companies in the hotel, travel and restaurant sectors came together on Monday to demand the rollback of service tax recently imposed by the government in the Union Budget for 2011-12.
“We want a rollback of the service tax imposed on hotels and air conditioned restaurants as it will adversely hit the industry. We (the hospitality sector) have been constantly overlooked in every Budget, but this time we have been hit,” Bharat Hotels Chairperson and Managing Director Jyotsna Suri told reporters here.
She said players from the sector have presented their case to the government and were optimistic of a positive response. “We have met a lot of people in the government, including officials in the Finance Ministry. Even the Tourism Minister has met with the Finance Minister to take up our request,” Suri said, adding that the government had said it would look into the issue.
Asking for a rollback, the industry players including representatives from Hotel Leelaventure, Kuoni Travel, Kingfisher Airlines, Jet Airways, National Restaurant Association of India, Nirulas, The World Travel & Tourism Council and Asian Hotels pointed out the adverse impact of the new taxes on the hospitality sector and consumers.
“Additional 5% service tax on hotel rooms will take the overall taxes by up to 17.5% in some states like Kerala. This will not only drive Indian tourists outside the country but also impact inbound travel,” WTTC India Initiative Chairman Vivek Nair said. Nair is also the Vice Chairperson and Managing Director of Hotel Leelaventure.
Finance Minister Pranab Mukherjee has proposed bringing hotel rooms of over Rs 1,000 per day and AC restaurants serving liquor under the service tax net, amounting to an additional tax of 5% and 3% respectively. Besides, service tax on air travel has been increased by INR50 in the case of domestic air travel and by INR250 on overseas journeys by economy class.
Restaurant owners said they would be forced to pass on the additional burden of 3% service tax on AC restaurants to the consumers if the rollback does not happen. “A consumer will be forced to pay about 25-30% taxes on the total bill value. Given the high rate of food inflation, there will be no choice but to pass on the burden of the increased taxes on consumers,” National Restaurant Association of India President and Nirula’s Managing Director Samir Kuckreja said.
The hospitality industry, however, is not willing to take any strong action like those in retail and garments sector which have resorted to strikes.
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