India’s apex Hospitality Association – Federation of Hotel & Restaurant Associations of India (FHRAI) has submitted a comprehensive list of recommendations on the upcoming Union Budget 2022-23 to the Finance Ministry outlining some of the much-needed expectations of the Hospitality industry. The Association has requested that the industry to be allowed to carry forward business losses up from the existing 8 years to 12 years and avail the SEIS/EPCG (Service Exports from India Scheme/ Export Promotion Capital Goods) benefits without any capping and rate reductions.
It also expects the Budget to provide extension on the timeline for export obligation under EPCG scheme and grant Export Status to the industry; inclusion of hotels and tourism related sectors in the National Infrastructure Pipeline (NIP), offer special emphasis for promoting meetings and conferences at hotels in view of the massive setback that hotels suffered due to the pandemic; grant Infrastructure Status to the hospitality industry, and provision of special tax incentives for domestic travel.
“We are requesting that hotels and tourism related sectors be included in infrastructure projects listed in the National Infrastructure Pipeline (NIP) set up under the Development Financial Institution (DFI) by the Ministry of Finance for promoting infrastructure funding. This will enable the COVID hit hospitality sector to avail funds with extended repayment periods at a low rate of interest. The hotel industry is a long gestation industry which incurs losses in the initial years of operations and profitability improves only after few years. Because of this, most hotels carry forward business losses with the expectation to set them off over the coming years. However, the industry’s profitability took a massive hit due to the unprecedented pandemic conditions and expects businesses to post losses for the next few years.
This may result in hotels being unable to set off past business losses within a period of eight years, adversely impacting cash-flow and RoI. Hence, we request that business losses be allowed to be carried forward from the existing 8 years to 12 years,” says Mr Gurbaxish Singh Kohli, Vice President, FHRAI. The hospitality industry is facing an existential crisis due to the lockdowns and restrictions imposed on it due to the on-going pandemic. FHRAI has stated that the sector is relying heavily on the support and favourable policies of the Government for its recovery.
The Association has stated that hotels under Service Sectors witnessed a high decline in business scenarios post 2007. Occupancy dropped by 20 per cent to 40 per cent and the decline of foreign exchange earnings during this period had been in excess of 5% on a year-on-year basis. “Increasing SEIS entitlement from existing 3 per cent to 10 per cent of the net Foreign Exchange Earnings for the next three to five financial years will help the industry mitigate some of the damage inflicted on it due to the pandemic. Also, to accelerate and incentivize all-round development of Tourism infrastructure catering to foreign tourists, fiscal incentives in the form of SEIS certificates and import against EPCG should be continued for the near future. In view of the volatile economic environment, the timeline for meeting Export Obligations (EO) should also be extended by at least four years for all the EPCG licenses which has EO period falling from February 2020 onwards.
The granting of Export Status to hospitality Industry with tax incentives and benefits would enable the sector to be more competitive and help the sector to jumpstart its growth,” says Mr Pradeep Shetty, Jt. Hon. Sec., FHRAI.
Among other recommendations, the FHRAI has asked that special emphasis be given for promoting meetings and conferences at hotels in India in view of the massive losses suffered through the pandemic. In its recommendations to the FinMin, the FHRAI has once again pleaded for one of the industry’s long-standing demands of receiving Infrastructure status and Industry status.