VAT helping unorganised sector, says hoteliers' body

After the implementation of 12.5 per cent VAT in the hotel industry, the hoteliers in Gujarat claimed to have suffered a loss in terms of the number of customers. To survive the competition many have absorbed part of the burden by increasing prices of some items in their menu.

T K Tekwani, president of the Hotel and Restaurant Association, said, "Promoting this year as a tourism year, the Gujarat government should have lowered the percentage of tax (VAT) instead of increasing it. This would have benefited the state."

Since, in the hotel industry, the higher tax is levied only in Gujarat, it has become tough for the state's hoteliers to survive the competition, as other states pay only 4 per cent tax.

Because of the rise in the tax payment, the customer is turning to alternatives such as fast food dhaba and outlets, which, in most cases, do not have the practice of making bills. This shift in choice by the customers has resulted in losses for the hoteliers in the organised sector.

"We have urged the state government and the finance minister to consider the tax structure and give us some relaxation. The latter has shown some positive response at least."

General manager of the Honest chain of restaurants, Kuman Singh, said, "There has definitely been some effects in the number of customers we receive after the tax was implemented. Since we are supposed to add 12.5 per cent tax in the customer's bill, the customer has to bear the entire tax. Earlier, we tried to dilute it through some ways or the other, but since it has become compulsory to show the tax on the bill, it has become difficult for us to hold our customers."

However, to make sure that "our customers stick to us, we have reduced prices of a few items in the menu", he added.

Narendra Somani, secretary of HRA, said, "We are trying an alternative formula for 12.5 per cent to be replaced by 4 per cent. We had raised the issue in the Vidhan Sabha and the government had made a deal with us that if it lessens the tax to 4 per cent, the entire tax would be borne by the industry and that we cannot buy the raw material form outside the state. We have agreed to it and are expecting a reduction in a week. Till then we have to continue the way we were asked to."