Context:

• Tourism plays a pivotal role in the economy of Himachal Pradesh, contributing significantly to employment, local businesses, and the overall development of the region.
• The state's landscapes, rich cultural heritage, and diverse ecosystems attract millions of visitors each year, making it a prime destination for both domestic and international tourists. However, the rapid growth of the tourism sector has also led to challenges, particularly in the regulation of homestays, which have become increasingly popular as an alternative to traditional hotels.
• The necessity for adequate laws and regulations has become evident as the homestay market expands, with concerns arising over compliance, taxation, and fair competition with established hotels. To address these issues and ensure sustainable tourism development, the state government of Himachal Pradesh has announced its plans to implement significant amendments to its homestay regulations with the introduction of the Homestay Rules-2024.

Key Points:

• These changes aim to address various concerns regarding the operation of homestays in the state, particularly issues related to compliance, taxation, and competition with the hotel industry.

Key Amendments

Taxation and compliance

• One of the most notable changes includes the proposal to impose the same tax on homestays as is currently levied on hotels in urban areas. This measure is designed to level the playing field, as many homestays operate similarly to hotels without contributing equivalent taxes, thereby undermining legitimate hotel businesses that adhere to tax obligations.

License Regulations

The new rules propose stricter licensing requirements for homestays:

• Revocation of Licenses: Homestays operating on leased properties will have their licenses revoked. Approximately 60% of registered homestays in Himachal Pradesh are currently on lease, which conflicts with existing regulations that require the licensee to reside in the same building as the homestay.
• Reduction in License duration: The license period for homestays will be reduced from five years to two years, necessitating more frequent renewals and compliance checks.
• Eligibility restrictions: Only residents of Himachal Pradesh will be allowed to operate homestays, effectively shutting down operations run by individuals from outside the state.

Unregistered Units and Penalties

The state government plans to take stringent action against unregistered homestays and bed-and-breakfast (B&B) units:

• Over 1,000 unregistered units are expected to be shut down as part of this crackdown.
• The penalties for operating unregistered units will increase significantly; fines may rise from ?10,000 to ?1 lakh, while the imprisonment clause for non-compliance will be eliminated.
   

Financial implications

To enhance revenue generation from this sector, additional fees are being considered:

• Increased registration and renewal fees are anticipated, moving away from nominal charges that have been in place.
• A cess based on the facilities offered by homestays may also be introduced, further contributing to state revenues.