NEW DELHI: Hotels in Delhi that charge less than Rs 1,500 per room per night will not have to pay luxury tax, the the Aam Aadmi Party government in Delhi announced today in the budget for 2016-17. The earlier threshold was Rs 750.
Hotels are levied luxury tax of 15% on hotel rooms. The change in the threshold limit will benefit hundreds of small hotels in the city, especially in areas such as Paharganj and Karol Bagh that attract budget travelers, both business and leisure.
“As another step towards a simplified tax regime, I announce the increase in threshold limit of luxury tax from existing Rs 750 to Rs 1500. This will reduce tax burden on citizens and tourists and make it easy for small hotels to do business,” Delhi finance minister Manish Sisodia said in his budget speech.
Currently, for a hotel room costing Rs 1,400 per room night, a guest has to pay Rs. 210 as luxury tax.
Sisodia also said that the government has decided to introduce self-declaration in luxury tax and assessment will be done on random basis. Currently, assessment of all hotels in compulsory.
He had earlier said that revenue collection from luxury tax for the state has seen an increase of 36.7%. “As against last year’s Rs 322 crore of revenue from luxury tax, this year will exceed Rs 440 crore is estimated to be collected,” he said.
Saeed Shervani, executive committee member of the Federation of Hotels and Restaurants Association of India said this will help several small hotels. “This will reduce the burden on customers of these hotels,” he said.
Shervani, however, said that they had hoped the government would set the threshold at Rs 3,000 per room night. “Today giving an air conditioned room is no longer a luxury. If Rs 3,000 was the threshold for luxury hotels, then many more hotels and consumers would have benefitted,” he said.
He also pointed out that luxury tax should only be levied on actual tariff and not on published tariffs of hotels, which is the case currently.
Credits ET Realty