The Hindu Business Line : Hotel industry seeks infrastructure status

The hotels sector has sought infrastructure status under Section 80 (I) A of the I-T Act, which would grant a 10-year I-T exemption to all new projects.

According to the Secretary-General of the Federation of Hotels and Restaurants Association of India (FHRAI), Mr Shyam Suri, such a tax exemption is crucial to attract more players into the sector. If granted, the proposal will go a long way in augmenting capacity in the hotels sector, he said.

Mr Suri said the hotel industry is justified in seeking infrastructure status under this particular Section as the industry has a multiplier effect on the economy and a long gestation period.

The previous year's Budget proposal to grant the hotel sector infrastructure status under Section 10 (23) G of the I-T Act was "not good enough" as it allowed hotel companies to raise long-term funds through infrastructure finance companies. This is a cumbersome process, he said, and there are few takers for it. Besides, funds are available low rates.

Further, the depreciation rate for hotel buildings, which had been reduced to 10 per cent from 20 per cent, should be restored to 20 per cent, he said. He added that tax exemption on the foreign exchange earnings of hotels, which had been phased out, should be revived under Section 80 (HH) D, especially if the Government was considering similar exemptions for the manufacturing (Section 80(HH)C) and software (Section 80 HH (E)) sectors. The FHRAI represents the entire hospitality industry covering 5-star, 5-star deluxe, 4- and 3-star properties, besides restaurants and other categories of hotels. According to an official with a hotel consultancy service, from a development point of view, measures such as the privatisation of airports, allowing more airlines to operate in the country and improving passenger facilities would give a boost to the hotels sector.

Further, the Government should allow auction of land in the metros for the development of mid-market and budget hotels and give a push to the development of world-class convention centres in the country.