Government to re introduce tax breaks for hotels, hospitals

according to recent media reports, the Union ministry of finance is set to notify a list of infrastructure facilities eligible for tax concessions. The concessions may be extended to the hospitality and hotel industry as well. While hotels with three stars and above will qualify for this benefit, hospitals with more than 100 beds will also be eligible.

However, this is not the first time that hotels and hospitals will get this benefit. The exemption for these sectors were introduced in the 2003-2004 budget, but the benefits got knocked off after the government erased Section 10(23 g) from the Income Tax (it) Act earlier this year, which contained provisions for concessions.

According to sources, the ministry is planning to issue a notification to re-confirm them along with special economic zone developers as eligible infrastructure projects under Section 36(1), clause viii of the it Act.

Section 80-IA defines, among other things, a list of eligible infrastructure projects like roads, highways, flyovers, airports/port, rail system and other public facility of a similar nature, notified by the Central Board of Direct Taxes. Besides, projects on water supply, irrigation, sanitation and sewerage systems, water treatment system, generation and distribution of electricity or any other form of power and telecommunication services also figure in the list.

The tax exemption to infrastructure projects was introduced in 1997 to ensure low-cost capital for infrastructure projects to compensate for the high interest and tax rates. But with the change in macro-economic scenario, the government withdrew the concessions. Ministry officials, however, were unavailable to explain the need to re-notify tax exemptions.

Also, experts question the rationale behind including only three star (or above) hotels. They feel that low budget hotels, mostly, cater to the needs of majority of population and hence they should also get tax benefits. This will attract more investment in the low budget hotels.

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