Hotels hit by steep hike in entertainment tax

Many of them have either cancelled New Year’s Eve events or scaled them down

PUDUCHERRY, 28/12/2016: Hotels were illuminated for the New Year celebration in Puducherry on December 28, 2016. Foreign tourists thronging at a hotel in the white town in Puducherry. Photo: T. Singaravelou

A steep entertainment tax could prove a dampener on New Year’s Eve partying, with at least a couple of hotels cancelling gala events.

Even as most of the rooms in the star category hotels and resorts in this former French outpost have been registering near-total occupancy for the New Year, the 45% entertainment tax imposed on establishments has forced several hotels to cancel or scale down their celebrations.

A decision to impose the entertainment tax was taken at a meeting of Municipal Commissioners and officers of the Local Administration Department chaired by PWD Minister A. Namassivayam on Friday. The government has worked out a formula and around one-fourth of the price of tickets will be calculated as entrance charges after imposing the tax.

According to a top government official, “No enclosed place or building, whether permanent or temporary, shall be used for public resort unless a licence has been obtained. One should pay entertainment tax for the conduct of any event on New Year’s Eve as clearly stipulated in the Pondicherry Municipality (Entertainment) Rules.”

A number of boutique hotels in the white town have cancelled their events as they fear that the heavy taxation would eat into their profits. “The Entertainment Tax is too high and there will hardly be any profit margin for hotels. We have cancelled two events planned for Saturday and Sunday due to the Entertainment Tax. A one-hour licence to serve liquor from 11 p.m. to 12 a.m. on December 31 costs ₹5,000 as against ₹2,500 per day last year,” a hotelier said.

Meanwhile, the Local Administration Department has been receiving applications for permissions to hold New Year parties.

According to official sources, the Puducherry Municipality, which has a number of star hotels under its jurisdiction, has received around 23 applications seeking permission to hold parties.

“Most of the hotels in Puducherry have an occupancy rate of over 90% and we expect this to go up in the weekend. A number of hotels in the budget and economy segments have been booked from December 24 to January 1 by tourists through travel agencies and online travel sites,” a spokesperson of the Puducherry Hotel Owners Association told The Hindu .