The Tourism Ministry, Government of India, in its “Guidelines for Approval and Registration of ‘Incredible India Bed And Breakfast’ Establishments” state that “The rate of taxes for property, electricity and water to be paid for classified B&B Establishments will be those prescribed by the appropriate authorities.”
Several homestay owners ask from time to time whether there is any homestay tax that is charged to run a homestay in India. However on the contrary, the government of India charges no homestay tax on owners. All they need to do is register themselves with the local tourism department.
Ideally bed and breakfast facilities or homestays are not required to pay any luxury tax, and they can use water and electricity on domestic rates and not on commercial rates.
However different exemptions are offered in different states. Here are some of the exemptions offered by individual states to bed and breakfast facilities (homestays):
HIMACHAL PRADESH – Incentives/Exemptions:
The relaxation of taxes/fees (as detailed below) for Home Stay Tourism Units in the rural areas has been provided in order to diversify the tourists from oversaturated areas to other areas and to give a boost to Home Stay and rural tourism to ensure participation of villagers in the sector and make it a House hold affair. Under the said scheme, Home Stay Units in rural areas will be registered by the Department of Tourism and will be provided following incentives/exemptions:
(a) Town & Country Planning Department will charge no change of land use fees from the registered Home Stay units;
(b) Home Stay units would be exempted (up to three rooms) from Luxury and Sales tax/Vat.
(c) Domestic rates for electricity would be charged from the registered Home Stay Units and
(d) Domestic rates of water would be charged from the registered Home Stay Units.
The exemptions sought above are imperative in order to encourage ordinary house – owners in rural areas to adopt the Home-stay model. Only Home Stay Units duly registered with the Tourism Department would be eligible for the above incentives.