Tax sops for hotels likely

NEW DELHI: Faced with a shortage of hotel rooms in the run-up to Commonwealth Games 2010, the government is likely to reduce luxury tax as a sop to the hospitality industry.
Sales tax on aviation turbine fuel(ATF) may also be slashed. The Planning Commission has given its nod to the tourism ministry to provide incentives for investments in budget hotels.
According to the approach paper for the 11th Plan, the government has prioritised India's competitiveness as a tourist destination. Officials said luxury tax should be charged on actual room rents rather than on rack rents.
The government also plans to bring down sales tax on ATF, currently ranging from 4%-36% in various states to a uniform level of 4% by notifying ATF as a 'declared good' attracting only central sales tax.
ATF constitutes 30% of the operating cost of all domestic flights and one-third of its cost is on account of taxes.
The tourism ministry is also likely to work out a policy on national level vehicle registration in conjunction with the ministry of road transport and highways. This would allow "hassle-free inter-state movement of passenger vehicles".
The Plan panel admitted that it was "difficult to estimate the full contribution of tourism to the economy since much of it shows up indirectly in sectors such as hotels and restaurants, transport, handicrafts etc but there is general agreement that the sector has great potential and needs to be encouraged".
Creation of adequate tourism infrastructure like modernisation and expansion of airports, increase in accommodation facilities under star and budget category and improved road connectivity to tourist destinations is likely to be given high priority.
The approach paper also emphasises the importance of "upkeep and preservation" of tourist attractions like historical sites, lakes and rivers besides exploring undeveloped archeological sites for development and maintenance through public-private partnership.