The Hindu Business Line : 10-year tax holiday sought for new hotel projects

A 10-YEAR tax holiday for new hotel projects, single-window clearances, infrastructure development and rationalisation of taxes are among the budget expectations of the hotel industry, which has been on the growth path for the past two years.

The industry also is seeking permission to set up real estate investment trusts (REITs).

Mr R. Venkatachalam, Chief Financial Officer, The Leela Group, said a tax holiday would encourage more players to set up hotels, to bridge the shortage of rooms which according to Government estimates stood at one lakh rooms.

With a view to getting this benefit, the Federation of Hotels and Restaurants Association of India (FHRAI), has in its pre-budget memorandum to the Government, sought infrastructure status for the hotel industry under Section 80I A of the I-T Act.

According to Mr Sham Suri, Secretary-General, FHRAI, hotels should be treated on a par with other infrastructure such as roads, ports, and airports. The body has also sought restoration of depreciation on hotel buildings at 20 per cent (from 10 per cent currently), as hotel properties required upgradation and renovation from time to time.

Mr Soumitra Saha, Finance Director, Grand Hyatt, Mumbai, said there was need to improve infrastructure such as roads and airports to encourage both business and leisure travel.

Further, there was need to rationalise the taxation on the hotel industry and adopt a single luxury tax across the country. Mr Venkatachalam has called for provision of single-window clearances at the local, State and Central Government levels to reduce procedural delays. HVS, a hotel consultancy, draws attention to the need for improving availability of finance by allowing real estate investment trusts (REITs).

This instrument, which is popular abroad, is in the nature of a mutual fund for real estate investment. The common man can participate in real estate development by investing in the instrument. According to an official with the hotel consultancy, REITs improve transparency as they can be traded on the stock exchanges.