Budget 2024: Hospitality sector seeks infra status, single window clearance

Budget 2024: Industry leaders have urged Union Finance Minister Nirmala Sitharaman to accord infrastructure status for hotels across all categories built at a project cost of Rs 10 crore and above

The Indian hospitality and travel sector has been witnessing sustained growth since the pandemic. To further boost this growth, the hospitality sector has sought "infrastructure" status ahead of the Union Budget 2024.

In a meeting with Union Finance Minister Nirmala Sitharaman, the Federation of Hotel and Restaurant Association of India (FHRAI) requested infrastructure status for hotels across all categories and convention centres built at a project cost of Rs 10 crore and above, to give a fillip to the budget segment in the sector. It added that the status should be granted irrespective of the city’s population.

Budget 2024: Key demands from Hospitality sector

 

“While many state governments have already accorded industry status to hotels, the Central government should give industry status to the sector and set up a corpus fund to incentivise all states to align their policies and offset any losses that may occur due to its implementation,” said Pradeep Shetty, president, FHRAI.

Echoing Shetty, KB Kachru, president, Hotel Association of India, said, “Along with infrastructure status, we have also recommended allowing hotels a higher rate of depreciation, reducing the rate of income tax, and allowing hotels to carry forward business losses for more years than is currently permissible. Removing petroleum goods and liquor from VAT and Excise regime to GST instead is another change that can help hotels reduce costs and improve revenues.”

Kachru added that providing a digital platform for all hotel no-objection certificates, licences, and permissions is also a key demand, which will improve the ease of doing business.

While GST-related requests are not examined as part of the Budget, the industry bodies also made a case for the rationalisation of GST during their meeting with Sitharaman. “We have asked for the introduction of one flat GST slab at 12 per cent from the current 18 per cent and the delinking of GST rates for restaurants from any room tariffs if they are part of the hotels, which causes confusion for patrons,” FHRAI's Shetty further said.

Currently, India has a branded hotel room inventory of around 170,000, which is expected to grow to approximately 235,000 by 2028. Despite this addition, the Indian hotel sector will continue to be underserved compared to major lodging markets worldwide.

"The forthcoming Budget offers a vital chance for the hospitality sector as we believe this is the golden period for the Indian tourism industry. We request the government to announce industry status for hotels and lower the GST rate from 18 per cent to 12 per cent, bringing it in line with international standards. This combined advantage will stimulate investments and generate job opportunities,” said Kush Kapoor, chief executive officer, Roseate Hotels and Resorts.

“The government can also lease old properties such as havelis and hotels for the long term, to benefit the tourism industry through a public-private partnership model,” Kapoor added.

Online travel aggregators, an important component of Indian tourism, have also made several demands from the upcoming Budget. “Allowing OTAs to register in states through their central head office will significantly alleviate the burden of establishing a physical presence in each state,” said Rajesh Magow, co-founder and group CEO, Make My Trip.

“We urge the Finance Minister to remove disparities between e-commerce operators and e-commerce suppliers in the domestic market,” he added. Currently, a customer pays a 5 per cent GST charge when booking a non-AC bus through an e-commerce platform but there is zero charge for a direct booking from the bus operator irrespective of the mode, Magow further said.

“We also urge the government to allow TCS credit under Section 206C(1G) to be used against salary income tax, thereby providing necessary relief to taxpayers, and encourage corporations to invest their CSR funds in developing and improving tourist destinations, which can lead to developing new attractions and upgrading existing ones while offering tax benefits to the corporations involved,” he further said.