Tourism industry is the country's third largest
foreign exchange earner.
During 2001, the Indian tourism industry was adversely
affected by the September 11 terrorist attack on World Trade Center in the
US and the attack on Indian Parliament on December 13. Foreign tourist arrivals
in India during the period Jan - Sep 01 have declined by 10.2% over the year-ago
period. Due to decline in tourist arrivals, margins of most hotel companies
are likely to be under pressure in FY 02.
The hotel industry is highly taxed. Apart from income
tax, it is subject to expenditure tax, state luxury tax, service tax and entertainment
tax.
At present the industry enjoys income tax benefits on
a specified percentage of profit generated from services rendered to foreign
tourists, provided this profit is transferred to the Tourism Development Reserve.
This benefit is provided under section 80HHD of the Income Tax Act and can
be availed only against foreign exchange receipts. However, the benefit will
be phased out by assessment year 2004-05. The amount transferred to Tourism
Development Reserve is to be utilized for the purposes mentioned under this
section before the expiry of 5 years.
To provide succour to the beleaguered industry, the Government
has announced 'visa-on-arrival' scheme, which will be operational from 01-Apr-02.
Initially this scheme will cover 16 countries.
Industry's demands from Union Budget 2002-03
Major demands made by Confederation of Indian Industry (CII),
Federation of Hotels & Restaurants Association and the Expert Committee
on Tourism & Aviation are as follows:
Share of tourism should be increased to 5% of total plan
outlay in the 10th Five-year plan. The share had declined from
0.19% in 1991-92 to 0.13% in 2000-01.
Customs duty on liquor should be reduced so that it can
be made available at prices similar to those prevailing in foreign markets.
50% of taxes collected from tourism should be allocated
for development of tourism infrastructure.
The 10% expenditure tax levied by the Central Government
should be removed.
Income tax benefits available under Section 80HHD of
Income Tax Act should be made at par with benefits under Section 80HHC.
Time limit for utilization of Tourism Development Reserve
should be extended from 5 years to 8 years.
Service tax should be charged only on non-catering services
such as exhibitions, fashion shows etc, which are not subject to any other
tax.
Key Players
Indian Hotels, East India Hotels, ITC Hotels, Asian Hotels,
Hotel Leela Ventures, Oriental Hotels, Bharat Hotels etc.
