Hotel Association of India (HAI), the apex body of Indian Hospitality Industry has submitted a recommendation to the Director General of Foreign Trade, Ministry of Commerce and Industry, Shri Santosh Kumar Sarangi urging the Directorate to review the Export Promotion Capital Goods Scheme (EPCG) and provide relief to the struggling hospitality industry. The Association has highlighted that, at the time of availing the duty benefits under the Scheme, no one could have envisaged the impact of Covid and the resulting dip in the foreign currency earnings. In light of the changed economic and geo-political scenario, HAI has said that it is imperative to review the EPCG policy and provide relief for the industry to survive and be able to fulfil its obligations under the Scheme. Hotels are facing huge challenges of liquidity, revenue losses, negligible foreign exchange earnings, high costs that are mostly fixed in nature and several other operational difficulties. Hotels require more time to fulfil obligations under the scheme. The industry body also requested the government to not issue notices to hotels, propose punitive action against them for non-fulfillment of obligations and not encash hotels’ bank guarantees.
| EXISTING PROVISIONS |
| – During the construction phase the Company has imported certain equipment required for its hotel projects under Export Promotion Capital Goods Scheme (EPCG) of Ministry of Commerce and Industry, Govt. of India. Under the Scheme, the custom duty on all the imported equipment has been levied at a concessional rate and the Company in turn, has an obligation towards export earnings, upon commencement of hotel operations, equivalent to six/eight times of the duty saved over a period of six/ eight years (Export Obligation period). – As per the requirement of the EPCG Scheme, the company has furnished Bank Guarantees to the Customs Department equivalent to the duty saved amount of Authorizations under the scheme for the aforesaid Export Obligation (EO) period of six/ eight years. – If the EO cannot be fulfilled within the prescribed timeline, 2 years extension can be applied by way of depositing composition fees as per the policy guidelines. – Additional 2 years extension may be considered for 3% Duty Authorizations with the condition that 50% of duty saved payable in proportion to the unfulfilled EO is paid to Customs before an endorsement of EO extension. – In the event the Company is unable to fulfil the EO within the due date and/or the extended due date, where extension is provided, the duty saved along with the prescribed interest on duty saved amount shall become payable. |
| RECOMMENDATIONS SUBMITTED BY HAI |
| – 5 Years Extensions: In addition to the currently available extensions as per the EPCG guidelines, it is requested to provide additional 4 years extension for all licenses expiring during the Covid period plus the expected time required for the business to normalize (i.e., for license expiring between March 2020 till March 2025). This will help the industry to generate adequate export earnings as the business stabilizes and international travel resumes to fulfil the export obligations under the scheme. – Export Obligation fulfilment under the Group company benefit: This is currently allowed under FTP policy 2009-2014 for 3% duty EPCG scheme. The same benefit should be extended to ‘0% duty EPCG scheme’ which will help to fulfil the EO basis the export earnings generated by the group company under the same shareholding. This helps immensely wherein the excess available export earnings of one hotel within the group can be utilized to fulfil the EO of another hotel. – Currently, in case of non-fulfilment of the export obligation, interest is charged @ 15%-18% p.a. from the date the duty benefit is availed till the date the duty is paid on non-fulfilment of the export obligation. This interest rate is very high as compared to the RBI repo rate, which is currently at 4%. So, it is requested that the interest rate for non-fulfilment of the EO should be reduced and linked to Repo Rate or be limited to the 50% of duty benefit. – [FYI, in August 2013, there was an amnesty scheme wherein the interest payable for unfulfilled EO was restricted to the duty saved amount. Please refer to Public Notice No. 22 (RE2013) / 20092014 dated: 12th August, 2013. Given the current unprecedented impact on the hospitality industry, relief on similar lines would immensely benefit the industry.] |
HAI pointed out that the hospitality sector is one of the most impacted industries due to the pandemic. Hotels were closed for almost 6-8 months during 2020-21 and re-opened in phased manner. The aftermath of the second and third wave has left a dent on the sector’s road to recovery.
The resumption of international passenger flights from 27th March is a relief to the airlines, airports and hospitality industry. However, the rebound of international travel is likely to be impacted due to the current geo-political situation and rising inflation.
HAI added that the hospitality industry is expected to be back to pre-covid levels only by FY24-25. Hotels are facing the worst crisis and government’s support would be critical for the industry to survive, grow and play a key role in India’s post pandemic economic recovery.
