Luxury tax for budget hotels in Delhi may be scrapped

The Delhi government is proposing to do away with luxury tax on rooms whose tariffs are up to Rs 1,500 per day.

Staying at budget hotels in the city may soon become cheaper with the Delhi government proposing to do away with luxury tax on rooms whose tariffs are up to Rs 1,500 per day.

Central Delhi’s Paharganj area, near New Delhi railway station, is home to the maximum number of budget hotels in the city. (Sanjeev Verma/ HT file photo)

At present, a luxury tax of 15% is levied on all rooms with tariffs above Rs 750 per day.

Earlier this week, the Arvind Kejriwal cabinet approved a proposal to increase the threshold limit for imposing luxury tax per day on room tariffs from Rs 750 to Rs 1,500, officials said.

A draft Bill to amend the Delhi Tax on Luxuries Act (1996) will be sent to Lieutenant Governor Najeeb Jung for his prior approval.

“The proposal will be sent to the L-G to seek his nod to amend Sections 2 and 8 of the Act. Once we get the L-G’s nod, the government will table it in the Delhi Assembly to pass the Bill,” said a senior government official.

Central Delhi’s Paharganj area, near New Delhi railway station, is home to the maximum number of budget hotels in the city. Places like Karol Bagh, Mahipalpur, Daryaganj, Patel Nagar, Rajendar Place and Chandni Chowk too offering budget accommodations.

Increasing the threshold limit has been a long standing demand of the hoteliers in the city. President of the Delhi Hotel Association, Arun Gupta, welcomed the development, saying the decision will help the owners in upgrading their hotels and will help stop customers from going and staying in NCR hotels due to the tariff difference.

“Many hotel owners were forced to charge less than Rs 750 per day for their rooms, as charging anything beyond that amount would have involved the complex process of maintaining bills for filing returns. The records were to be scrutinised every three months by the tax department. With the threshold about to be increased to Rs 1,500, owners can now heave a sigh of relief and upgrade the services they provide,” said Gupta.

In March, Delhi’s deputy chief minister Manish Sisodia, who holds the finance portfolio, had announced while presenting budget for 2016-17 that government would revise the threshold limit of luxury tax.