In its proposals for the 2003-04 Budget, the Federation of Hotel and Restaurant Associations of India has asked for abolition of the expenditure tax.
This tax is levied by the Central government and it is currently at 10 per cent on room rates above a certain level.
The association has asked for its abrogation as state governments, too, impose a luxury tax on room rates. In fact, some states impose on a room charge of as low as Rs 300.
As both the taxes are designed to tax luxury consumption in hotels there is no reason to charge the guests two separate taxes on the same item of expenditure, the federation felt.
For the past three years, it has proposed the elimination of expenditure tax. In the Budget for 2002-03, a concession was provided: the eligibility for the tax was hiked from Rs 2,000 per individual per day to Rs 3,000.
However, since the tax was levied on an individual a day earlier, the eligibility limit was effectively reduced from Rs 4,000 to Rs 3,000. The federation feels that this anomaly must be corrected.
The service tax was imposed on the hotel and restaurant industry in 1997 for any official, business and social functions such as conferences and banquets in a hotel.
The federation said this effectively amounts to double taxation because guests who pay for food and beverages also pay the sales tax.
The government, in the Budget for 2002-03, gave a tax waiver for a year.
The federation has asked for doing away with the service tax in cases where the guest is paying the sales tax for lunch or dinner in a conference or banquet.
Hotels are willing to pay the service tax, and charge the guests in cases where there is no sales tax on food and beverages, such as hiring a hall for an exhibition or a fashion show.
On imported liquor, the federation has asked for reduction of special additional duty on imported liquor imposed by the Central government.
Currently, it is being charged at 75 per cent and 50 per cent for the two slabs above the basic rate of 182 per cent.
And since it is duty on duty, the tax incidence comes to 417 per cent on liquor and 226 per cent on wines and beer.
This level of protection makes purchase of imported liquor for the hotel industry unviable, the federation feels.
And since the additional duty is being charged in lieu of excise duty levied by state governments on locally produced liquor, and since the states are charging various duties and fees on imported liquor also, the federation said the additional duty should be abolished or reduced substantially.
