AS THE year ended on a positive note with tourists returning to India, the ministry of tourism has pitched for greater incentives for the industry to fuel further growth.
The ministry will submit a number of proposals to the ministry of finance for getting incentives in Budget 2010- 11. These include getting infrastructure status for hotels, revival of income tax ( I- T) incentive and deemed export status for earnings of inbound tour operators. Sources said despite being hit by the slump, the tourism and hospitality sector contributes to 6.63 per cent of the gross domestic product ( GDP) and provides 8.89 per cent of total employment. Incentives could give a further push to the sector.
The ministry has sought inclusion of hotels as infrastructure under section 80- IA of the Income Tax Act to boost new hotel projects being set up by companies.
Lately, airports, sea ports and railways were accorded infrastructure status. Hotel industry sources feel if this incentive is given to the hotel industry, all new hotel projects will be able to avail the benefit of 100 per cent deduction with respect to profits and gains for a period of 10 years. This may bridge the shortfall of hotel accommodation in the next five years as investments may come into the sector and help lower room tariffs.
Another wishlist submitted to the finance ministry includes revival of 80 HHD of the Income Tax Act, which exempts fifty per cent of profit earned from services provided to foreign tourists and a further 50 per cent exemption for investing the profits in the sector.
Officials said if this section, which was applicable till 2005- 06, is revived it will lure investments into the hotel and tourism sector.
Sources said the deemed export status for earnings of inbound tour operators will provide relief to the tour operators in the current scenario of global economic slowdown.
The ministry may propose foreign exchange earned by inbound tour operators to be considered as deemed export and full service tax exemption so that they get reimbursement of service tax at par with the other exporters.
The ministry of tourism may also request North Block to bring cruise tour operators at par with tour operators by extending the 75 per cent abatement of service tax. If accepted, this will provide a boost to the cruise tourism industry in the country, which is still in its infanc.
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