Maharashtra Government has decided to waive off entertainment tax on upcoming hotels and spas for 5-10 years

The Maharashtra Government has decided to waive off entertainment tax on upcoming hotels and spas for 5-10 years. Considering the current slowdown in the Indian hospitality industry, will this prove to be a boon for the industry?

Sudeep Jain - Executive Vice President - India, Jones Lang LaSalle Hotels

Entertainment tax is a very small component of the taxes charged to the end consumer, which varies from state to state. Taxes for rooms and F&B are more centered on luxury and VAT. Therefore, the reduction on the Entertainment tax will have little to no impact on the prices to consumers, and hence will not result in demand growth for the hospitality industry. Moreover, it is certainly not enough if this applies only to upcoming hotels, and will not serve to boost the returns for developers/investors or to accelaretate their hotel developments.

What really needs to be done to revive the sector is:

1. Declare hotels as infrastructure, thereby making it easier for developers to borrow funds
2. Provide single window clearance in practice
3. Provide separate zoning for hotel development land and price such land appropriately
4. Reduce luxury and VAT taxes as a temporary boost to end-consumer prices