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FHRAI submits pre-budget memorandum

The Federation of Hotel and Restaurant Associations of India (FHRAI) has submitted a comprehensive pre-budget memorandum encompassing direct tax and policy recommendations for the upcoming Union budget 2021–22. Specific to the business losses accrued due to COVID-19, the apex Hospitality Association has recommended a MAT waiver be given to the industry for a period of three years beginning April 2021 to March 2024. The FHRAI has requested for treating payments received from international tourists as Foreign Exchange for the purpose of EPCG scheme and that the time to perform export obligation under the scheme be extended by 5 years. Being a highly capital intensive industry, it has asked to extend investment linked benefits from section 35 AD to on-going cap-ex of hotels and resorts to promote high quality brownfield cap-ex and capacity expansion.

Gurbaxish Singh Kohli, Vice President, FHRAI, said, “Over the last eight months the Hospitality industry has been severely battered by the pandemic. The upcoming Union Budget will determine which way we go from here. The industry has a lot of expectations from the Government. Since the industry has not received much support so far, we are hoping that the upcoming Budget will have special focus on the hospitality industry and certain longstanding recommendations such as review of the Kamath Committee recommendations, industry and infrastructure status to Hotels, Resorts and Restaurants across the country, to raise threshold limit of hotel room tariff for charging GST, to allow IGST billing to hotels for corporate and MICE bookings will be addressed to rescue us from the downward spiral.”

On the policy front, the FHRAI has demanded that hotels, resorts and restaurants need to be accorded industry status. It has asked that the Government classifies Hospitality under the RBI Infrastructure lending norm criteria for access to long term funds. The apex Association has also demanded that the Kamath Committee recommendations be reviewed for accommodating the Hospitality industry’s needs.

Pradeep Shetty, Jt. Hon Secretary, FHRAI, said, “Currently hotels built with an investment of Rs.200 crores or more have been accorded infrastructure status. This threshold has to be brought down to Rs.25 crores per hotel. This will enable hotels and restaurants to avail term loans at lower rates of interest and also have a longer repayment period. Giving Industry status to Hospitality sector is a must. Setting up a corpus fund for industry status to hospitality infrastructure will ensure its national industry status by compensating states for any losses. Also, the stringent conditions and the unrealistic parameters suggested by the Kamath Committee for restructuring of loan have made the restructuring plan unfavourable for the hospitality industry. The benchmarks suggested in the scheme are more stringent than what the banks used to offer to the industry in the original loans.”

Shetty, added, “We also request the Government to consider increasing the threshold limit of hotel room tariff for charging GST at 18 per cent to be raised to Rs.9500/- from Rs.7500/-. This will bring parity of rates between the Rupee and the Dollar. Back when the threshold was fixed at Rs.7500/-, the exchange rate of the Dollar per Rupee stood at Rs.64/-, but today the same has reached at Rs75/- per Dollar. Indian tourism sector is losing a fair bit of global tourist and MICE traffic in these segments. It is also standing to lose domestic traffic in this segment which is going to the much cheaper South East Asian destinations.”

Among other demands, the FHRAI has recommended enhancing funding limits to raise the SEIS rates to 10 per cent for hospitality industry to enhance the quality of accommodation and to enable discharging GST liabilities.

DVS Somaraju, Hon. Treasurer, FHRAI, said, “SEIS is a way to set off indirect tax levied to reduce our cost of exports. It was also allowed to discharge service tax liabilities through the scrips. This will enable to discharge of GST liabilities through the SEIS scrips. It will also enable investments into developing more globally acceptable products and will help in earning higher foreign exchange. Also IGST billing to the hotels for corporate bookings and MICE must be allowed. This will enable the companies to avail GST input credit which will incentivize them to spend their annual budgets in Indian cities instead of turning to holiday destinations of South East Asia.”

Kohli concludes, “We sincerely hope this year’s Budget to take our industry most seriously. This Budget will make or break our dream of Incredible India. The FHRAI hopes that Govt. considers us as an inclusive part of the economy, one which cannot be ignored.”

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