The Hindu : New Delhi News : New ten-year no-tax regime for tourism industry proposed

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Friday, Jan 05, 2007
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New Delhi

New ten-year no-tax regime for tourism industry proposed

Vinay Kumar

"Fringe benefit tax needs to be rationalized"

NEW DELHI: Recognising that the tourism industry has come of age in India and it should not be linked with other industries for extending incentives and concessions, the Union Tourism Ministry has proposed that the industry be given a no-tax regime for 10 years from the date of commencement of commercial operations.

In its proposals for the XI Five-Year Plan (2007-2012) and the 2007-08 Annual Plan, the Ministry said the no-tax regime should operate for at least 10 years from April 1, 2007 to March 31, 2017.

The Ministry said it was also important to encourage investments from non-tourism sector through a package of incentives which should be applicable for the hilly areas, rural areas and places of pilgrimage, North-East region, Jammu and Kashmir, Uttarakhand and Himachal Pradesh. "For this purpose, there need to be no tax regime for a period of 10 years from the date of commencement of commercial operations," it said.

The Ministry said tourism establishments also need to be allowed a tax-free regime for their expenditure on overseas publicity and promotion; and training of their employees in recognised institutions.

On the role of the Tourism Finance Corporation of India, the Ministry proposed that the interest rates for loans should be uniform and preferably the same as those offered for housing sector, thereby giving encouragement to the hotel industry. It said the TFCI needed to cater to smaller projects and especially those with a loan amount up to Rs. 1 crore. Loans should also be offered to tourism related industries, especially the non-accommodation sector — convention centres, amusement parks, aero sports, transport fleet, cruise liners, golf resorts and for development of water and adventure sports.

It favoured levy of service tax only on "service charge" for the services rendered by operators of tourism industry and not on the total cost which included components like hotel and transport charges, guide fees, entrance fees and meals. Since Fringe Benefit Tax (FBT) is an added burden on the hotel industry, the Ministry proposed that it should be rationalised for the entire tourism industry.

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