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Hotels Overall Impact: Positive   The Finance Minister has given an impetus to the tourism and the hotel sector. In order to provide further fiscal relief to the tourism sector the following measures have been adopted:- Expenditure tax on hotels will, henceforth, apply only to room charges, and will be payable only where such charges are Rs 3,000 or more per day, as against the existing threshold of Rs 2000 per day. The deduction available under section 80HHD of the Income-tax Act in respect of foreign exchange earnings of hotels or tour operators will be enhanced to bring it in line with the deduction available to exporters under section 80 HHC. A deduction of 50% of the profits earned by units setting up and operating large convention centres will be allowed for 5 years under section 80-IB. The tourism industry has been adversely affected by the recent spate of events. In December 2001, service tax on the services provided by hotels had been exempted. This exemption expires on 31st March 2002, which has been extended for one more year upto 31st March 2003. Propelling the tourism industry will harmonize with the expansion in the hotel industry. The industry found good mention in the budget with the following proposals: The plan outlay for tourism has been increased by 50 per cent to Rs 225 crores for 2002-03. Private sector management and investment in the development of airport infrastructure through long term leases have been emphasized. Upgradation of the 4 metropolitan airports to international standards has already been announced. Modalities for inviting offers have been finalized and the lease process is expected to be completed in 2002-03. Private sector participation in greenfield airports will be encouraged through a package of concessions: Availability of land and related infrastructure from the State Governments. Exemption from levy of Inland Air Travel Tax (IATT) and Foreign Travel Tax (FTT) on departing passengers for projects located in States that charge sales tax on Aviation Turbine Fuel (ATF) at Central Sales Tax (CST) rate. Charging of Advance Development Fee (ADF) by way of additional Passenger Service Fee (PSF) at the existing airports for help in financing of the greenfield airport. Levy of User Development Fee (UDF) at the new airport. Financial assistance/equity participation by Airports Authority of India. In order to encourage development of world class infrastructure facilities, the customs duty on specified equipment for ports and airports has been reduced to 10%. The proposed new airports in Bangalore and Hyderabad will benefit from these concessions. In pursuit of the government’s disinvestment plan, disinvestment in the Hotel Corporation of India (HCI) and International Tourism Development Corporation (ITDC) is expected this year. In order to promote air travel, in addition to the exemption of inland air travel tax within the North East States, the exemption has also been extended on air travel to and from North East States. Impact The budget has addressed the key issues of reduction in the expenditure tax and the increase in the tax exemption of forex earnings in line with the other category of exporters. These relief measures were expected in the last budget itself but have been finally put in place. The budget is aimed at boosting the hospitality industry, which has great potential. All in all, since quite a few changes have been made in the tax structure for the hotel industry, the effect on the same will be positive. Parul Inamdar

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