Hotel and restaurant owners in the city are despondent.
They have every reason to feel downhearted with the volume of their businesses dwindling by the day. Even while they were crying hoarse about the existing VAT (Value Added Tax), levied by the State Government, the Union Government has imposed service tax.
The foodies are shelling out more as hoteliers and restaurateurs pass on the burden of service tax to customers.
“Many of our regular customers, who used to organise big parties and banquets in hotels, are now moving out to kalyana mandapams. Hotels have become essential services and we cannot afford to close them down. But if this kind of situation persists, we may even be forced to do that,” says K. Pattabhi Ram, president of Vijayawada Hotel Owners’ Association.
Pointing to the fact that VAT is collected in two slabs – 5 per cent from hotels that have a turnover of less than Rs.1.5 crore per annum and 14.5 per cent from the ones whose turnover exceeds Rs.1.5 crore annually.
“When put together, the taxation of food consumed by the customer comes to almost 20 per cent which is quite high,” says Mr. Pattabhi Ram.
“A major chunk of the morning crowd comprising people who visited restaurants for breakfast is now drifting away to roadside food joints. An AC restaurant is no more a luxury, it is a necessity. Moreover, some restaurants are partially air-conditioned and it is difficult to identify such finer details,” says Bindu Madhav, secretary of the association.
The hoteliers complain that profits have already gone down due to inflation in the past few months. “The hospitality industry is seen as catering to the rich, which is not always the case,” argues Mr. Bindu Madhav.
The executive committee members of five States located in the southern zone are scheduled to converge at Vijayawada for a two-day meet on July 5 and 6.
“It will be an important meeting where hoteliers will discuss their problems and chalk out their future course of action to build pressure on the government to end their woes,” said Mr. Pattabhi Ram.
