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Ministry eyes sops ahead of budget
January, 14th 2010

The tourism ministry has pitched for greater incentives for the industry to fuel growth even as the year ended with an increase in the number of tourists.

Ahead of the forthcoming budget, the tourism ministry will submit a number of proposals for incentives to the finance ministry.

Primary sops include getting infrastructure status for hotels, revival of income tax incentive and deemed export status for earnings of inbound tour operators.

Sources said despite being hit by recession, the tourism and hospitality sector contributed to 6.63 per cent of the gross domestic product and 8.89 per cent of employment in the country.

The ministry has sought inclusion of hotels as infrastructure under section 80- IA of the Income Tax Act to boost new hotel projects being set up by companies.

Currently, airports, sea ports and railways are accorded the infrastructure status. According to sources in the hotel industry, if this incentive is given, all new hotel projects will be able to avail the benefit of 100 per cent deductions with respect to profits and gains for 10 years.

This measure may also quickly bridge the shortfall of hotel accommodation in the next five years as huge investment may come into the sector. It could even help bring down room tariffs across the country.

Another wish list submitted to the finance ministry includes revival of section 80 HHD of the Income Tax Act. It exempts 50 per cent of profit earned from services provided to foreign tourists and further 50 per cent provided the same was invested in the tourism sector.

Officials said revival of this section, which was applicable till 2005-06, would attract more investment in the hotel and tourism sector.

The tourism ministry may propose that foreign exchange earned by inbound tour operators be given deemed export status and full service tax exemption be provided to them.

This would enable them to get reimbursement in service tax on a par with other exporters, earning them relief in the current economic scenario.

Going by initiatives taken to boost cruise tourism in India, the ministry may want cruise tour operators to be brought on a par with others by extending 75 per cent abatement of service tax. This, if accepted, would give a boost to cruise tourism, which is still in its infancy.

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