Thiruvananthapuram: Finance minister K.M. Mani’s decision to simplify the turnover tax assessment of bar hotels with two-star classification and below, which is expected to lower their tax rate, could turn out to be a big temptation for the nearly 200 three-star bar hotels in the state to renounce their star status. If these starred hotels opt out of classification, quality will be the biggest casualty.
As of now, two calculations are made to assess the turnover tax of bar hotels: either 10 percent of the annual increase in the purchase cost of liquor from the Beverages Corporation or an increase of a certain percentage from the turnover tax paid last year and whichever is higher is fixed as the turnover tax. Mani has now limited the calculation for two-star hotels and below to just the annual cost of purchasing liquor from BEVCO.
Such a change will be especially useful for bar hotels that presently possess a three-star classification. Such hotels have differential rates for the liquor sold within their property. For instance, the liquor served at their executive lounge or pool side or rooms will be valued higher than the drinks provided in their walk-in bar.
Sales tax officials normally ignore the variations in rates and use the highest price charged for liquor in a bar hotel to calculate turnover tax for the entire sales.“But officials cannot harass us if the turnover tax is calculated only on the basis of the purchase cost,” an owner of a three-star property said.
Loss of classification will not mean non-renewal of bar licence. “Bars that exist before 2010 will get a renewal even if there is no classification,” said Sudheesh of Kerala Hotel and Restaurants’ Association. Excise commissioner Anil Xavier said that if licences were renewed earlier for those who had lost classification it was only conditional.
