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Hotels, restaurants seek reduction in luxury tax

Special Correspondent

Memorandum submitted to Deputy Chief Minister


  • Andhra Pradesh charges a flat rate of five per cent luxury tax on the published tariff
  • Goa recently amended the rules to make the tax applicable for the actual tariff charged

    Bangalore: Members of the Federation of Hotels & Restaurants Association of India (FH&RAI) submitted a memorandum to the Deputy Chief Minister and Finance Minister on Wednesday seeking reduction in luxury tax, in line with Andhra Pradesh where it is five per cent.

    The delegation was represented by K. Syama Raju, treasurer of FH & RAI and C.V. Mahadevaiah, president of Karnataka Pradesh Hotels and Restaurants Association.

    FH&RAI represents over 1,800 hotels and 800 restaurants in about 350 cities in India including those in Karnataka.

    The delegation apprised the Deputy Chief Minister that the hotel industry was not given any relief in terms of luxury tax, tariff for water and power as applicable to other industries. They drew the attention to a Government Order in which it is mentioned that luxury tax has to be charged only on room tariff above Rs. 400 and on the actual tariff collected. A cap of 10 per cent to be placed on it. The GO further stipulates that all concessions offered under the Industrial Policy of the State (2002-2007) are made available to private investments in the tourism sector.

    "It is interesting to note that on the recommendation of Jaswant Singh, the then Union Finance Minister, who abolished the expenditure tax of 10 per cent, most States took steps to reduce the taxes in the hospitality industry. At present these taxes are considered the highest in the world by most foreign tourist "

    Many States have amended the luxury tax Act to make the tax applicable on the actual rate charged and not on published tariff. States such as Goa recently amended the rules to make the tax applicable for the actual rate and thus, at present only a few States such as Karnataka, Andhra Pradesh and Tamil Nadu follow the practice of charging luxury tax on the published tariff. Andhra Pradesh charges a flat rate of five per cent luxury tax on published rate. In Karnataka, luxury tax is at 12.5 per cent on the rack rate and not what is charged from the guests.

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