Close on the heels of the Mumbai carnage and global slowdown, imposition of luxury tax in Punjab has evoked strong reactions from the hotel and restaurant owners with the Hotel and Restaurant Association saying the move would wipe off the hotel industry from the state.

Association general secretary Amarbir Singh told FE that the association had 1,492 members comprising hoteliers and restaurant owners who have opposed the imposition of tax threatening to shut operations if the government failed to announce its rollback.

Hoteliers say that occupancy had already declined to 25-30% in the last few years as the government was not encouraging tourism.

?There hardly are any visitors, religious or even for business purpose. The luxury tax will worsen the situation and we would have to discontinue operations if it is cleared.? Describing the present situation as ‘worst’ for the state hotel industry, he said tha0t it had become difficult for the hoteliers and restaurant owners to even pay the salaries of their employees. Singh claimed that in the past 1 month, 13 hotels have shut their operations in the state as they were unable to get expected business volume due to slowdown.

The state government has decided to charge 8 % luxury tax on hotels having room rate of Rs 200 and above and 10% from banquet halls. The state government has directed the hoteliers, banquet halls and marriage palace owners to get them registered to deposit first installment of the tax by the end of next month. The government expects to earn Rs 20 crore a year through this step.

The state government has notified that it will now charge 10% luxury tax, 12.36 % service tax and 12.50 % value added tax (VAT) from banquet hall owners. Hoteliers feel this will be a burden on hotels as well, as most of them have banquet halls in hotels. They feel luxury tax should be applicable to three-star to five-star hotels and not to small-budget hotels.

Luxury tax is charged on hotels having a roof tariff of over Rs 2,000 in Haryana and Chandigarh. However, luxury tax has been levied on hotels charging a meager Rs 200 in Punjab, the state hoteliers added.

?The occupancy rate has come down from 90% to 40% in wake of the Mumbai carnage. At this time, the industry is trying to woo tourists by offering special discounts and imposition of luxury tax at this time was an ill conceived move? said a cross section of hoteliers.