Budget 2021 Expectations: Can Union Budget act as saviour for hospitality sector hit by Covid?

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New Delhi | January 28, 2021 4:27 PM

Budget 2021 Expectations: While lakhs of livelihoods will reply upon the announcements of Union Finance Minister Nirmala Sitharaman in the Union Budget, industry experts are seeking a few key announcements.

Budget 2021 Expectations for HotelsMakeMyTrip, Yatra, Cleartrip, GoIbibo, etc., have been the prominent OTAs while Swiggy and Zomato have been the leading FSAs in the country. (Reuters image)

Budget 2021 Expectations for Hotels, Travel, Tourism: The Covid pandemic changed our lives forever, rattled economies, and dismantled industries. The hospitality sector perhaps received body blows due to the Coronavirus and lockdown measure. Now, industry experts are banking on the Narendra Modi government’s February 1 Budget 2021 to heal the gnawing pain.

While lakhs of livelihoods will reply upon the announcements of Union Finance Minister Nirmala Sitharaman in the Union Budget, industry experts are seeking formulation of pragmatic policies, rationalisation in tax rate, and ease of doing business from the Central government.

“It is critical to protect and support the hospitality sector today, more than ever. While the sector is slowly recovering on the back of domestic tourism, the journey to revival needs strong handholding from the government. According to‘ Industry’ status to hotels and hospitality will allow the sector to receive benefits available to manufacturing and will enable the hospitality sector to unlock immense potential. Moreover, it will save the livelihood of millions of people who are, directly or indirectly, dependent on the sector. Additionally, formulation of pragmatic policies, rationalisation in tax rate, easy compliances and ease of doing business can help the sector in speeding up return to normalcy at a fast pace,” KB. Kachru, VP, Hotel Association of India & Chairman Emeritus & Principal Advisor, South Asia, Radisson Hotel Group said ahead of Budget 2021.

According to pre-Budget 2021 recommendations from the Hotel Association of India, hotels must be accorded Infrastructure Industry status. It is recommended that the government must declare hotels of above Rs 25 crore Capex (excluding land) as infrastructure. Hotels should be charged power rates applicable to Industries and the license period must be increased to 3-5 years instead of annual. A single hotel license to serve liquor must be issued to hotels in five-star and higher category. The government must relax and regulate liquor operation timings for 5-star hotels across India, HAI said.

In Budget 2021, the Central government must reduce income tax rates. The present income tax rate is 30 per cent plus a surcharge of 7 per cent or 12 per cent (based on income) plus 4 per cent education cess. Thus the effective tax rate works out to 34.94 per cent approximately. The reduction in tax will increase cash flow of the companies. It will also provide some sort of exemption on account of pandemic. The entire industry is taking the hit of many fixed expenses like mandatory maintenance of properties, employee salaries etc. even without revenue, the Hotel Association of India recommended.

The Modi government must reduce the GST rate on Hotels in Budget 2021. The reduction in GST will have a direct impact on the room rates of the hotels. Such reduction would provide immediate relief to the industry as consumers will be charged at a lesser rate which will increase the occupancy of the hotels. Reduction in GST Rate to say 12 per cent for hotels where the current GST is 18 per cent, will make India more competitive and be in line with other Asian economies like Hong Kong, China Thailand and Singapore where the tax rate ranges from 0 to 7 per cent, the Hotel Association of India said. In Budget 2021, the Modi government must bring electricity under GST net, and put Liquor under GST will ensure single tax and single compliance, it said.

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