Tourism industry being denied tax exemptions

ISLAMABAD (September 07 2003) : Despite issuance of duties and taxes exemption notifications for tourism industry, particularly hotels, the government departments are reluctant to entertain these SROs, terming tourism industry as 'Category-C' industry.

This was stated by Ministry of Tourism, which demanded of the Central Board of Revenue and Ministry of Industries to give 'Category-A' status to the tourism industry, as concerned departments have refused to give exemption of duties and taxes on the import of machinery/equipment to the said industry.

Sources said that it is strange to note that, on the one hand, the government is making claims pertaining to promotion of tourism in the country and, one the other, the concerned departments are refusing to enforce the notifications.

It is learnt that central excise department would shortly start an exercise to ascertain the factual status pertaining to allegations levelled by the Ministry of Tourism.

Ministry of Tourism referred to Cabinet decision which gave Tourism status of an 'Industry' entitled to benefits available to other industries (Ministry of Industries Circular of July 30, 1990 refers).

Subsequently, Board of Investment (BOI), while announcing the Investment Policy in 1997 converted the status of Tourism from the 'Industry' to 'Services'.

Ministry of Industries, later on, in pursuance of Prime Minister's directive in August, 1999, through a Circular, restored the status of tourism from 'services' to 'industry', thus entitling investors to all facilities/concessions available to an industry in the country.

Meanwhile, CBR through an SRO.439(I)/2001 of June 18, 2001 has placed tourism, hotels and tourism related projects under priority industries (Category – C, not Category-A), which attracts the following incentives:

(I) Entitled to concessional rate of custom duty at the rate of 10 percent on plant, machinery and equipment (PME), if not manufactured locally, and first year allowance (FYA) at the rate of 75 percent of the cost of plant, machinery and equipment.

(II) Hotels are getting industrial tariff status as per Notification of Ministry of Petroleum and Natural Resources SRO No 918(I)/94, dated 7th September, 1994.

Wapda is also giving A-2(b) tariff to hoteliers which is very close to industrial tariff.

The Ministry of Tourism observed that while implementing the SRO referred to above, various government agencies have raised observations/objections, that Tourism and its allied industries are not a full-fledged 'Industry' and advantages accrued to other industries (Category-A) are not applicable to them.

Tourism Ministry apprehends that if the demands of Tourism Industry, particularly hoteliers, are not accepted as 'A' Class industry, the targets fixed for the industry cannot be achieved.

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