Govt to clamp down on tax evading hotels

NEW DELHI: Losing about 20 crore every year in luxury tax evasion as against the total collection of Rs 72 crore, the state excise department has finally woken up to the problem.
For the first time, the department raided guest houses in Greater Kailash and Karol Bagh last week and is hoping to realise about Rs 20 lakh from them.
During the raids, owners of two guest houses — one in M-block Greater Kailash-II and the other in Karol Bagh — were found to be maintaining duplicate account books.
The raiding team found that while most of the rooms were occupied, the guest house record showed only a few bookings. While the department is yet to assess the total tax evasion, their rough estimate suggest that each of the two owners were evading Rs 5 lakh of luxury tax.
Over and above this amount, the owners would have to pay 100 per cent penalty and 24 per cent penal interest as per the provisions of Delhi Tax on Luxuries Act. Said an official: "To evade tax, the guest house owners were not only misleading the excise department, but also giving incorrect figures to the police. The number of guests in the two guest houses was much higher than those registered in the police records."
From all hotels and guest houses offering rooms for Rs 500 per day, the excise department charges 10 per cent luxury tax. Due to a slump in the tourism industry, the tax rate was lowered by 2.5 per cent.
Officials said the maximum evasion of luxury tax was from the 5,000-odd medium-range hotels and guest houses, where the home tariff vacillated. "Guest houses offering rooms for a little more than Rs 500 often faked records to show their tariff below the taxable limit," an official said.