Hoteliers seek review of new sales tax scheme

The Surat Hotel and Restaurant Association has demanded that the decision to levy sales tax on small and medium hotels in the state under a new scheme be reconsidered.

The association said the proposal in the state Budget to levy the tax is unreasonable and unjustified. A delegation of the association made a representation to the district collector Pankaj Joshi and sent a letter to the chief minister Narendra Modi in this regard on Wednesday.

The association said in its representation, "Due to the changes in the sales tax structure and cancellation of the exemption limit, each hotel and lodge owner will be forced to opt for composite tax. The lump sum tax scheme was proposed only for caterers, but the finance minister has applied the scheme for the entire hotel industry. This is causing difficulties not only to hotel owners but even the customers."

The representation said, "The per person Rs 75 tax exemption limit for hotels has been cancelled by the state government, due to tax evasion and misuse of the benefit by big hotels and caterers. The government should take measures against such hotels and caterers, instead of levying 4 per cent sales tax on small hotels."

"The central government has fixed the limit of annual turnover of Rs 40 lakh for audit of smaller industries. Similarly, the state government should grant tax exemption from lump sum tax scheme to hotels and restaurants which have annual turnover of up to Rs 40 lakh. The state government should impose 2 per cent sales tax on hotels which have turnover of Rs 40 lakh to Rs 80 lakh and 4 per cent tax on hotels with annual turnover of over Rs 80 lakh."

The representation said, "The set-off provisions have been removed in the new lump sum tax scheme. Because of this, the tax paid on LPG, oil, dry fruits, butter, cheese, spices and other raw materials would not be refunded in the set-off, which would lead to increase in prices of various edible items."

The association president Arun Shetty said, "The hotel and tourism industry generates 68 jobs on an average on investment of Rs 10 lakh compared with 12 to 15 jobs of agriculture or industries on the same investment. This new tax scheme would discourage development of small and medium restaurants, which would mean no new employment opportunities."