Provide tax holidays to all hotels across country in Budget'08-09, demands Hotel Association of India

With the sharp spurt in business and leisure travelers to India, the country is currently experiencing a shortage of almost 100000 hotel rooms to meet the accommodation needs of the foreign and domestic tourists, said Hotel Association of India (HAI). The hotel industry is a highly capital intensive industry. Construction of a new hotel project in 5 Star category demands massive Capital Investment ranging from Rs. 300 to Rs. 500 crores, it added.

The bulk of investment in a hotel is on land and building which has a very long period of return on investment to the investors. To accelerate the pace of construction of more hotel rooms, the hotel industry therefore needs to be declared an infrastructure industry under Section 80 I/A of the Income Tax Act 1961. It should be given full benefits of concession for infrastructure facilities available to other sectors like airports, seaports, power projects and gas distribution networks, HAI said.

In the Union Budget 2007-08 tax holiday of 5 years for Two-Star, Three-Star, Four-Star Hotels and Convention Centers with a seating capacity of not less than 3000 in the NCR area of Delhi, Faridabad, Gurgaon and Gautam Budh Vihar, Ghaziabad was given to speed up the infrastructure of hotel rooms needed for the Commonwealth Games in 2010. This facility needs to be extended to hotels of all categories across the country in the forthcoming Union Budget. It would give a boost to the growth of hotel accommodation in the country, demands HAI.

Another major demand of HAI is
Hotel buildings constitute the ‘plants’ for the hotel industry as their usage is round the clock for 24 hours. The industry has to make very heavy investments in renovation, upgradation and upkeep of the hotel buildings. Section 32 of the IT Act should therefore be amended to restore the depreciation rate to 20%. The additional depreciation applicable to Plant & Machinery u/s 32 1 (ii a) should also be allowed to hotels which have to make heavy investments in plant and machinery.