Tax holiday finds few takers in hotels sector

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Finance minister P Chidambaram’s move to provide tax holiday to the tourism sector received a lukewarm response from industry players. Giving an impetus to the tourism and hospitality sector, the finance minister announced the extension of the five-year tax holiday for two-star, three-star and four star hotels located in districts having a world heritage site.

Such hotels are required to be constructed and start functioning at any time during the period beginning April 1, 2008 and ending on March 31, 2013. Though many players have been clamouring for granting the infrastructure status to the segment, the Budget evaded any such expectation.

“It could have been wider. The tax holiday could be have been made for all tourist destinations,” said Madhavan Menon, managing director, Thomas Cook (India) Pvt Ltd.

Agra, Jalgaon, Chhatarpur, Thanjavur, 24 Parganas (excluding areas falling within Kolkata) and Darjeeling are among the areas falling under the specified districts having a world heritage site.

However, on the positive side, Peter Kerkar, director, Cox and Kings India Ltd, feels that the move by the government would boost supply of hotel rooms and encourage tour operators to promote these destinations more aggressively, which lack quality accommodation.

“It is a positive step from the government and provides incentive to operators to set up hotels in such heritage places and help in attracting greater tourists,” said Prabhat Pani, chief executive officer, Roots Corporation Ltd (Ginger Hotels).

Currently, Section 80-ID of the Income-tax Act provides for a five-year holiday to new hotels of two-star, three-star and four-star categories and convention centres. These hotels must be constructed and begin functioning between April 1, 2007, and March 31, 2010.