Information of hotel industry laws in india - part2

By: Help Line Law | Posted: 13th October 2008

.Tax benefits/ incentives.
.Current projections in budget.

Hotel Industry in India currently has supply of 110,000 rooms and there is a shortage of 150,000 rooms fueling hotel room rates across India. According to estimates demand is going to exceed supply by at least 100% over the next 2 years. To overcome, this shortage Indian hotel industry is adding about 60,000 quality rooms, currently in different stages of planning and development, which should be ready by 2012.

India's hotel industry comprises of four main categories star hotels, heritage hotels, budget hotels and unclassified hotels. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years.

It is forecasted to be the number 3 market in the world by 2015 for hospitality and tourism.

The industry is growing at a very rapid pace and there is a demand for more rooms both in metros and smaller towns.

In short, the Indian hospitality industry is poised for tremendous growth as the demand-supply imbalance has prompted several national and international hotel companies to focus their energies towards expansion in India. The next few years will thus witness the opening of several hotels in India.

Regulatory policy

The Ministry of Tourism is the nodal authority & along Dept. of Tourism it is responsible policies promotion & regulation of hospitality industry particular hotels.

The following are the some of important guidelines issued by the Dept. of Tourism.

. Approval of Hotels at Project Stage and Classification & Reclassification of Hotels.
. Guidelines for Classification of Heritage Hotels.
. Time Share Resorts (TSR).
. Stand Alone Restaurants
. Guidelines for apartment hotels.
. Guidelines for approval of Guest Houses.

FDI in this sector is permitted up to 100 per cent on the automatic route. For foreign technology agreements, automatic approval is granted if:-

.Up to 3 per cent of the capital cost of the project is proposed to be paid for technical and consultancy services.

.Up to 3 per cent of the net turnover is payable for franchising and marketing/publicity fee, and

.Up to 10 per cent of gross operating profit is payable for management fee, including incentive fee.

Incentives

Tax incentives under the current Budget

.Five year holiday from income tax being granted to two, three or four star hotels established in specified districts having UNESCO-declared 'World Heritage Sites'; the hotel should be constructed and start functioning during the period April 1, 2008 to March 31, 2013.

.FBT exempted on crèche, employee sports, guest houses facilities.

.No specific projections for this sector under the Current Budget.

Conclusion

The thriving economy and increased business opportunities especially growth in the tourism in India have acted as a boon for Indian hotel industry.

The future scenario of Indian hotel industry looks extremely rosy. It is expected that the budget and mid-market hotel segment will witness huge growth and expansion while the luxury segment will continue to perform extremely well over the next few years.

India Law offices wrote this article on behalf of hotel industry information and Applicable India Law policy. For more information on indian hotel industry opportunities and hospitality industry in india for visit law firm lawyer directory helplinelaw.com.
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Tags: rapid pace, budget hotel, hospitality industry, indian hospitality