International Joint Ventures and Merger & Acquisitions

Hospitality & Tourism Industry in India: Government Schemes to Ease of doing Business

November 03, 2020

Maharashtra Government has reduced the number of license from about 70 to just 10 for the hospitality sector.

At present, Maharashtra’s hospitality and tourism industry has witnessed a drastic and welcoming change with hotels and restaurants now opening up with less stringent requirements for licenses and NOC’s. This has been done, keeping in view the loss incurred within his industry due o the Covid-19 pandemic all across the world and with a view to uplift this sector and boost its dominance again. The State Cabinet has approved the ‘ease of doing business’ policy for the hospitality sector and within this new policy, the number of licenses have been reduced from about 70 to just about 10. The Cabinet has sought to boost this industry by attracting large investments and increasing employment opportunities within this industry. The changes can be summarised below.

1. The number of licenses, NOCs & Applications have been reduced

The State Tourism Minister, Mr. Aaditya Thackeray stated that this move had been long overdue considering the downfall in profits within this sector which further took a major hit with the onset of he current pandemic. IT was the Maha Vikas Aghadi Cabinet which further put it into motion for approval. Apart from the reduced number of licenses, which have gone down in number from 70 to 10 at present, there have been relaxations made in the NOCs as well. Currently, instead of obtaining 15 NOCs from seven departments, as was the norm before the pandemic, only nine self-certifications shall be required for the hospitality sector. This is a much reuired change which will boost investment opportunities within the tourism and hospitality industry and raise the level of employment within the same as well.

2. The validity of the license shall Be 5 Years

Within the new policy, the validity of all licenses shall now be from the date of issuance of this license. The tourism department will handle the single window system for issuing these licences for the hospitality industry. And further another very prominent move to increase the dominance of this sector is the fact that the State Cabinet has also approved the revised expenditure of 523 crores for the Navtejaswini project, which is funded by the International Fund for Agricultural Development. Previously, this scheme had been duly approved but had not been implemented but now it stands implemented with the aim of improving the standard of living and entrepreneurship skills of rural women in India.

The state government has also sought to derive efforts from the government to uplift nearly 10 lakh families out of poverty permanently through this policy. This project shall lay special emphasis on the provision of personal loans to women and provide bank linkages to self-help groups as well. A lot of efforts shall also be provided for bringing them into the banking system permanently.

Furthermore, the Government of India provides several schemes and opportunities for boosting business within the hotel and tourism industry of India. These incentives provide higher possibilities for investment not only from domestic players but also from foreign investors who are keen to invest in India due to the liberalised policy and opening up of the private sector more and more. Hotels play a pivotal role within the tourism industry and thus, the tourism industry has always been one of the largest industries in India.  The World Travel & Tourism Council had calculated that the tourism industry in India generated nearly 6.6% of the nation’s GDP which has only quadrupled in the recent years. The tourism industry also supports 39.5 million jobs in the country which accords to 7.7% of the total employment of the country in itself. Furthermore, the Indian tourism industry is ranked third amongst the fastest-growing tourism sectors in the world and is predicted to grow at an average annual rate of 7.9% from 2013 to 2023. Thus the provision of incentives within this sector is one of the smartest moves to ensure its permanent growth and to uplift any stagnation caused by the current pandemic. The incentives provided by the government have been enumerated below:

3. Export Promotion Capital Goods Scheme (EPCG)

The Export promotion capital goods scheme (EPCG) scheme has been administered in India by the Directorate General of Foreign Trade, Ministry of Commerce and Industry. Within this scheme, the customs duty is levied on the import of capital goods for a hotel in India is provided at a concessional rate of 3%, subject to an export obligation equivalent to 8 times of the duty saved on the capital goods imported under the EPCG scheme, to be fulfilled in 8 years reckoned from the date of the Authorization issue. These capital goods shall include spares which also include refurbished and spares, tools, jigs, fixtures, dies and moulds within their ambit. The DGFT has further clarified through a notification that all the hotels are permitted to import furniture under the export promotion capital goods (EPCG) scheme as well.

Further, the import of motor cars, sport utility vehicles or all-purpose vehicles by hotels, travel agents, tour operators or tour transport operators and companies owning golf resorts, shall be made at a concessional rate of 3% customs duty, subject to the following:

That the total foreign exchange earnings from the hotel, travel & tourism industry as well as the golf tourism sectors in the current and preceding three licensing years is Rs.1.5 crores or more.

4. 100% Foreign Direct Investment (FDI) in Hotels through Automatic Route

  • That any ‘duty saved’ amount on all EPCG Authorizations issued during a licensing year for the import of motor cars, sports utility vehicles and all-purpose vehicles shall not exceed 50% of the average foreign exchange earnings from the hotel, travel & tourism as well as the golf tourism sectors during the preceding three licensing years.
  • That the vehicles imported must necessarily be so registered that the vehicle is used for tourism purposes only. Further the hotels are also required to submit a copy of the registration certificate to the RA as a confirmation of the import of such vehicles. However, all the parts of such motor cars, sports utility vehicles and all-purpose vehicles like the chassis etc. cannot be imported under the EPCG Scheme, whatsoever.
  • The Government of India has now permitted 100% FDI within the hotel industry through the automatic route. The automatic route simply implies that there shall be no requirement of any prior regulatory approval unless it is for any post facto filing or any intimation with the RBI.
  • Furthermore, the term hotels shall also include restaurants, beach resorts and other tourist complexes which provide accommodation or any catering and food facilities to tourists in general.
  • The tourism-related industry basically includes travel agencies, tour operating agencies as well as tourist transport operating agencies, units which provide facilities for cultural, adventure and wildlife experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports as well as health units for tourists and Convention or Seminar units and organisations as well.

5. Export House Status

  • The Government of India now provides recognition to all manufacturers, exporters, service providers and all export oriented units that earn a steady level of foreign exchange as Export Houses, Trading Houses, Star Trading House and Super Star Trading Houses and thereby provides them with several benefits and opportunities to support the growth of exports from India.
  • This scheme basically provides recognition to all hotels, travel agents and tour operators as an export house or trading house or star trading house or even a superstar trading house at present. Certain other facilities within a Star Export House shall also be eligible for licenses, certificates, permissions and customs clearances for both imports and exports on a self-declaration basis or a fixation of input-output norms on priority within 60 days or through the exemption from compulsory negotiation of documents through banks or even via 100% retention of foreign exchange in EEFC account, enhancement in normal repatriation period from 180 days to 360 days, entitlement for consideration under the Target Plus Scheme and all exemption from furnishing of Bank Guarantees in Schemes under this policy entirely.
  • Furthermore, hotels of one-star and above (which also include managed hotels and heritage hotels) that have been approved by the Department of Tourism and other Service providers within the tourism sector that have been registered with the Department of Tourism, shall be entitled to a duty credit equivalent to 5% of the foreign exchange which has been earned by them in the preceding financial year.
  • Moreover, all stand-alone restaurants shall now be entitled to a duty credit equivalent to 20% of the foreign exchange earned by them in the preceding financial year. And in the case of one and two-star hotels and stand-alone restaurants, the foreign exchanged earned via International Credit Cards and other such sources as may be notified only shall be taken into account for the purposes of th computation of duty credit entitlement under this policy.

6. Served from India Scheme

  • The Government of India has introduced the “Served from India Scheme” with the primary objective of facilitating the exporters of various types of services. The main goal of this scheme is to accelerate the growth in all the export of services in order to create a powerful and unique ‘Served from India’ brand, which is instantly recognized and respected all over the world. This scheme also entitles all the Hotels, Restaurants, Tourism and Transport related Services with a Duty Credit Scrip. The use of a “Duty Credit Scrip” is mainly for the import of all capital goods which includes all the spares, office equipment and professional equipment, office furniture as well as consumables. All these components comprise of their main line of business. In the case of hotels and stand-alone restaurants, the usage of duty credit entitlement is primarily for the import of food items and alcoholic beverages only.
  • The hotels of one-star and above (which include all the managed hotels) and heritage hotels duly approved by Department of Tourism and other Service providers within the tourism sector registered with Department of Tourism are entitled to 5% whereas the Stand-alone restaurants are entitled to 10% of foreign exchange earned by them in preceding financial year.


It is highly evident that the hotel and tourism industry has been one of the major providers of foreign exchange and revenue which has contribute to the growth in the GDP of India over the years. The various schemes and initiatives of the Government have thus also been aimed at easing out the formalities and providing various incentives to attract further investments within this sector. However, the global pandemic of Covid-19 has put the maximum dent on this sector leading to significant losses and downfalls which have not been seen in decades preceding this year. Therefore, the easing of business in Maharashtra through the reduction in the number of licenses, formalities and NOC’s comes as a much welcome respite to hoteliers and the entire industry in general. The goal is to get this sector thriving and busy as was the case prior to the onset of this pandemic.

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