Capital value-based tax system to spell doom for star hotels: Association

Many starred hotels, including the Taj Mahal Palace Hotel in south Mumbai, will be compelled to shut down, all thanks to the new capital value-based system of property tax calculation, which has landed the city’s hotel and restaurant industry in jeopardy.

DS Advani, the president of the Hotel and Restaurant Association (H&RA) of western India, in a letter to municipal commissioner Sitaram Kunte (a copy of which is with dna), has written how the system will deal a huge blow to the hotel industry and urged the civic chief to address the issue in a meeting urgently.

The letter reads: “The recent change in BMC’s property tax calculation on the basis of capital value is a big blow to the organised hotel sector. If this issue is not resolved soon, then the entire industry will be in trouble and hotels like the Taj will have to shut down.”

Besides struggling with issues like low tourist turnout, the hotel industry is also reeling under the pressure of recession, high water and sewerage taxes, as well as electricity bills and expensive operating costs.

“We oppose the retrospective implementation of taxes. The corporation has not rightly applied the ready reckoner to the old buildings while calculating the property taxes on the basis of capital value. In comparison to un-starred category hotels (0.575% of capital tax), besides other charges, starred hotels have to pay 1.14%. Our taxes are four to five times more than residential property taxes, whereas these should not exceed more than two times the residential taxes,” the letter added.

The cap of 3% on old properties has been retained, but it will be revised after three years.