Reducion in tax on heritage hotels to boost tourism

JAIPUR: Rajasthan's tourism is built on the pillar of its enchanting heritage and hotels in the category are windows into the royal and colourful past. Chief minister Vasundhara Raje's proposal to reduce taxes on heritage hotels is seen as an attempt to revive tourism that has been traditionally the backbone of the state's economy.
In the budget announced on Monday, Raje reduced VAT for basic category of heritage properties from 14% to 5%.This segment of properties constitutes majority of heritage properties, although there are many hotels in 'Classic' and 'Grand' categories.
In order to encourage rural tourism, she has exempted all guest houses with up to five rooms from luxury tax. Rural Rajasthan is dotted with small, old havelis and the move will see owners of such properties converting them to guest houses.
"The average room occupancy in heritage hotels is between 35%-40% compared to about 55% for modern properties. The reduction in VAT is expected to benefit a large number of heritage hotels in the state and boost tourism," said Randhir Mandawa, general secretary of the Indian Heritage Hotels Association.
Mandawa said the exemption of luxury tax on guest houses gave a fillip to rural tourism as many owners of small properties would be encouraged to convert their havelis to hotels.
"The thrust on rural tourism will create new opportunities for people like folk artistes, camel and horse owners as these properties are scattered over many places in the rural Rajasthan," added Mandawa.
Raje also reduced luxury tax on these heritage properties during off-season from 5% to 4% keeping in view of the harsh summer when tourists flow into the state comes down dramatically.
"The hotel industry comes to a stand still in the summers and it really becomes a question of survival for the heritage properties. We welcome the measures announced in the budget," said Manvendra Singh, co-convener of CII-Rajasthan's panel on tourism.
While heritage property owners and operators hailed the measures, they also said the government could have avoided raising luxury tax on the 'Grand' category of hotels from 8% to 10%.
"All the tax relief extended in the budget will bring some relief to the heritage properties but the government could have avoided the luxury tax," added Rajendra Pachar, who owns and operates heritage properties.
But Manvendra Singh said the increase in taxes on mineral water, ACs and refrigerators will offset much of the benefits extended.