"Ministry of commerce and Directorate General of Foreign Trade (DGFT) have entered into a technicality and have termed tourism and other service exporters as `service providers' and not `service exporters'. All over the world, services sold in foreign exchange are termed as exports. We should also be treated as service exporters in the Exim Policy," a FHRAI official said.

The two most important incentives allowed to all exporters are facilities to import their raw materials duty free and exemption from all local taxes. Both these incentives have been denied to tourism exporters," he added.

Hotels and restaurants import raw materials, consumable and components to satisfy the requirement of serving foreign tourists and earning foreign exchange from them. Most of these are food items. These are being imported at full duty. An additional duty is also applied to them.

"We have been denied a duty free import on the ground that the export product is not clearly identifiable as hotels are selling the same food items to foreigners as well as local customers," he said.

To provide a solution to the problem, the association said: "A hotel which has earned 80 per cent of its revenue in foreign exchange in the previous year should be allowed to import 80 per cent of its requirements of raw materials duty free." The association also demanded that import of marble, chandeliers, carpets and wooden furniture should be considered capital goods for the hotel industry and should be covered under export promotion capital goods (EPCG) scheme.

"DGFT and Duty Drawback Directorate have ruled that import of certain capital goods will be denied to the hotel industry as they are in the nature of raw materials and consumable," the official said adding that the hotel industry should not be equated with manufacturing sector using plants and machinery as capital goods," he said.

Marbles, chandeliers, carpets and furniture are capital goods for the hotel sector required to provide quality services to foreign tourists, he added. According to a data released by tourism department, Indian tourism industry has earned Rs 14,260 crore during the calender year 2000, a 10 per cent growth over the same period previous year.