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Hotel stays to be slightly cheaper

In a move that is set to give a boost to the hospitality sector in the Capital, the Delhi government has decided to reduce luxury tax on hotels from 12.5 per cent to 10 per cent — with immediate effect. Moushumi Das Gupta reports.

delhi Updated: Jun 23, 2009 01:11 IST
Moushumi Das Gupta

Hotel rooms in Delhi will become cheaper, albeit marginally.

If a 5-star deluxe room earlier cost you Rs 8,000 per night, it will now cost Rs 7,750 — the difference being just enough to get a bottle of water delivered to your room, perhaps.

In a move that is set to give a boost to the hospitality sector in the Capital, the Delhi government has decided to reduce luxury tax on hotels from 12.5 per cent to 10 per cent — with immediate effect.

The reduction will be on the published tariff, not the actual tariff. Industry experts, however, are not too buoyed.

“We had demanded a tax reduction on the actual and not the published tariff. This will hardly make any impact. The industry was looking at a bigger relief,” said Rajendra Kumar, vice-president, federation of Hotels and Restaurant Association of India.

Hoteliers in the Capital have long complained that the high luxury tax in Delhi is driving away business to satellite towns of Uttar Pradesh and Haryana, where luxury tax is 5 per cent and 10 per cent respectively. Because of this, tour operators would bypass Delhi and take tourists to Gurgaon directly from the airport.

Kumar, who is also a director of Ambassador Hotel, said that because of the slowdown, occupancy rates in big inventory hotels (five-stars with more than 100 rooms) have come down to about 40 per cent while in small inventory hotels (rooms less than 100), they have come down to about 60 per cent.

“In such a dismal scenario, the reduction in published tariff won’t improve things,” he said.

OP Mendiratta, general secretary, Forum of Star Hotels in Delhi said the benefit will be lost because of reduction in luxury tax on published tariff. “Because of a sluggish market, these days every hotel is giving some discount to customers. In this scenario, reduction on published tariff does not mean much,” he said. “To give real benefit, the government should have brought down the tax on actual tariff to at least 4-5 per cent.”

However, VV Bhatt, Delhi finance secretary, said, “The move is expected to give the much-needed stimulus to the hospitality sector. It will also make the system transparent.”