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Major tax incentives: July 6 Budget
June, 24th 2009

Aiming at boosting the tourism sector, the Union Tourism Ministry will seek major tax incentives for hotels and restaurants including exemption of service tax and excise duty in the Budget.   

The Ministry also wants rationalisation of import duty on adventure sports equipment to promote adventure tourism in the country.    

Tourism Minister Kumari Selja, who is scheduled to meet Finance Minister Pranab Mukherjee this week, has finalised the blueprint to be submitted to him for the Budget proposals for the growth of the sector, sources in the Ministry said.    

There is also a proposal for exemption of service tax for inbound tour operators on their foreign exchange earnings.    

The sources said Selja would submit the detailed proposals to the Finance Ministry seeking various tax incentives for the sector.    

The Ministry has also sought inclusion of hotels in list of infrastructure products like airports, railways and sea ports. If this measure is adopted, all new hotel projects will be able to avail the benefit of tax deductions of 100 per cent with respect to profits and gains for a period of 10 years.    

"This will help in channelising huge investments of about Rs 50,000 crore in the tourism sector in next 3-4 years and quickly bridge the shortfall in hotel accommodation. This will also help in lowering room tariffs in the country," said a sources.

Tourism Ministry has sought exemption of Central Excise duty on products produced and consumed within the premises of restaurants.    

Currently central excise is levied on hotels and restaurants which are in service industry and do not get the benefits available to small scale industries as the state governments do not recognise these activities as industrial activity.    

It is, therefore, all the more necessary that restaurants are exempted from the levy of central excise duty, sources said.    

On adventure sports, the ministry wants to exploit its tremendous potential which attracts both foreign and domestic tourists.    

As per the existing policy, only members of Adventure Tour Operators Association of India are allowed to import adventure equipment for their own needs after payment of custom duty. The cost of such limited import turns out to be very prohibitive.    

Vendors who can import these equipment in bulk are not allowed to do so.    

"There is also a shortage of modern adventure related equipment which results in a total turn off for the adventure tourists. Therefore it is proposed that the vendors be allowed to import these equipment which can be provided to the adventure tour operators at reasonable costs," sources said.

The foreign exchange earned by the inbound tour operators is also not exempted from the service tax.    

In order to provide relief to the tour operators in the current scenario of global economic slowdown, it is proposed that forex earned by inbound tour operators be considered as deemed export and full service tax exemption be provided to them.    

Ministry sources said the service tax exemption will provide relief as well as encouragement to these tour operators, who are finding it dificult to sustain business due to the falling inbound tourists.

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