Unregistered & unaccounted: Palampur’s hidden hotels threaten state revenue

A surge in unregistered hotels has been seen in Palampur, Baijnath and Bir, presenting a significant challenge to the organised hotel industry and causing substantial losses to the state revenue. Despite the rapid growth of these illegal establishments, the state GST and tourism authorities have largely turned a blind eye. Many of these hotels have secured completion certificates despite not meeting basic legal requirements and most lack essential features like a fire safety system, which is mandatory by law.

In the absence of proper government oversight, a growing number of illegal hotels with more than 10 rooms have appeared not only in rural areas but also in urban centres, further exacerbating the financial strain on the state exchequer. Registered hotel owners must pay 18 per cent GST on room bookings, as well as income tax and property tax, while these unregistered hotels evade all such payments.

Hotel owners in Palampur have voiced their concerns, pointing out that while they dutifully pay all required taxes, including GST, property tax to the municipal corporation and pollution fee, the government has failed to take any action to safeguard their businesses against these illegal operations. When contacted, a senior official from the GST department placed the blame on the tourism department and the municipal corporation for issuing clearances to these hotels without ensuring compliance with the law.

A spokesperson for the Palampur Hoteliers Association revealed that many unregistered hotels are also offering online room bookings, further undercutting the legitimate businesses by charging lower rates and evading taxes. These illegal operations enjoy the benefit of paying domestic rates for power and water while also sidestepping fee to the Pollution Control Board and failing to comply with labour laws and minimum wage requirements.

“We are not opposed to competition, but these hotels should operate legally,” says Archit Butail, owner of ITC-run Hotel Fortune. “The government should direct both the Tourism Department and GST authorities to conduct a survey to identify these illegal operations and ensure they register with the proper authorities.”

Vinay Sharma, owner of Hotel Bliss, added, “It’s concerning for us that despite the ongoing tourist season, hotel occupancy in Palampur remains low. Tourists are opting for cheaper, illegal alternatives that don’t charge GST.”