Gujarat must ease taxation to drive hotel investment
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Following an announcement from Gujarat’s tourism department that incentives would be offered to hoteliers across the state, the hospitality industry is hoping that tax reliefs will also feature in the new promotion. The prevailing tax policy places a lot of pressure on the hospitality industry whereby hotels in Gujarat must pay higher rates of VAT and luxury taxes than in other states around the country. Tax exemptions on hotel units were laid out in policy planning as far back as 2000, but were scrapped in 2002 forcing hoteliers to cough up large amounts in a complex tax net of service tax, VAT and luxury tax. However industry insiders say that the tax regime must be addressed if the state government is serious about stimulating investment in Gujarat’s hotel sector. It has also been suggested by some that the incentives as they stand are simply too meagre to stimulate any serious investment because high tax rates significantly erode the benefits of interest subsidies and compromise the profitability of hotel businesses. Nonetheless, big players are ready to enter the state with big development projects. According to the Business Standard the Grand Hyatt is lining up a 400-room property and Kamat Hotels is also interested.
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