Capital Investment Subsidy for Tourism Units under the UP Tourism Policy 2022

What is the UP Tourism Policy 2022 capital investment subsidy?

The Capital Investment Subsidy is the principal financial incentive of the Uttar Pradesh Tourism Policy 2022, run by the Department of Tourism, Government of Uttar Pradesh. The policy came into effect on 23 November 2022 and remains in force for 5 years or until substituted. It replaced the Tourism Policy 2018.

Uttar Pradesh built the policy around a simple economic fact: the state receives the largest number of domestic tourists in India, yet room supply and organised tourism infrastructure have not kept pace. The Capital Investment Subsidy pays back a slice of what a private investor spends on building that infrastructure. A hotel, a resort, a theme park, an eco-tourism unit or a wayside amenity; once the unit is actually running.

The policy also confers industry status on star-category hotels, resorts and registered eligible tourism units. That brings industrial electricity duty rates, industrial rates of Nagar Nigam house tax and Jal Sansthan water and sewerage tax, and permission to build hotels and resorts on land in state industrial areas and on land demarcated for industrial use by development authorities.

Who is eligible for the tourism capital investment subsidy?

Your project can claim if:

• It falls in one of the 33 notified eligible tourism unit categories. These run from adventure tourism projects, all-weather and seasonal camps, budget hotels, caravan units and caravan parking places, MICE convention centres, cultural centres and tourist villages, through eco-tourism resorts, farm stays, flotels and floating restaurants, heritage hotels, heritage homestays, hotels, new tourism startup units, yoga and naturopathy centres, light and sound shows, mega projects, multi-level parking, permanent tented accommodation, pilgrimage dormitories, public golf courses and public museums, to resorts, revolving restaurants, rural homestays, theme, amusement and water parks, inbound tour and travel operators, tourism and hospitality training institutes, river cruise units, wayside amenities and dhabas, wellness centres and wellness resorts.
• It is registered with the Uttar Pradesh Tourism Department under the Tourism Policy 2022.
• It commences commercial operations, because the subsidy is released only after that.
• It is in PPP mode with a Government of Uttar Pradesh agency, department or authority: such projects can avail the subsidies permissible under the policy.

Three transitional categories are also covered. Units that already availed benefits under the tourism policies of 2016 and 2018 get benefits within the permissible limits of expansion under this policy. Units built, under construction or non-operational after 1 February 2018 but registered under the Tourism Policy 2018, which start commercial operations during the operative period of this policy, are eligible as per the rules. And heritage buildings, palaces, forts and other classified buildings constructed before 1 February 2016 and converted into tourism units through adaptive reuse can obtain benefits, subject to inspection and evaluation by the Departmental Screening Committee and final approval of the Special Category Building by the State Level Special Tourism Committee.

Your project is not eligible if:

• It is not registered with the Department of Tourism, or does not fall within one of the notified eligible unit definitions.
• You are an individual seeking a personal cash benefit. This is an enterprise-level investment incentive, claimed by a registered tourism unit against audited investment, and individuals cannot apply for it as a personal entitlement. The one individual-facing grant in the policy is the separate art and culture revival grant described below.
• The unit has claimed the capital investment subsidy on another tourism project. A single unit shall not be granted capital investment subsidy under multiple tourism projects.
• You want both the capital subsidy and the interest subsidy, a unit claiming one is not entitled to the other.

How much is the capital investment subsidy?

Additional capital subsidy

The policy caps the sum of all incentives at a maximum of 30 percent of the investment amount, and states that eligible and ineligible components of the investment amount are specified in the operational guidelines. Read those guidelines before you build the investment schedule, because what counts as an eligible component decides the size of the cheque.

Interest subsidy, as the alternative

A unit that does not take the capital investment subsidy may instead claim interest subsidy of 5 percent on a loan of up to Rs 5 crore taken from an RBI approved scheduled commercial bank in the name of the registered eligible tourism unit, capped at Rs 25 lakh per annum, and only on the part of the loan used for eligible components.

What documents are required?

How to apply for the UP tourism capital investment subsidy

1. Confirm your category. Check that the project fits one of the 33 eligible tourism unit definitions in the policy, and the specifications set out in the departmental guidelines and notifications.
2. Register the unit with the Uttar Pradesh Tourism Department at uptourism.gov.in. Registration under the Tourism Policy 2022 is the gateway to every incentive in the policy. Bed-and-breakfast and homestay owners follow a separate two-step route: register the establishment on the Ministry of Tourism portal nidhi.nic.in first, then submit that registration certificate on the UP Tourism website to receive the state certificate.
3. Take your approvals through the single window. The state's single point processing mechanism for services, clearances, approvals, permissions and licences is linked to the Nivesh Saarthi and Nivesh Mitra portals run by Invest UP, with application tracking and status checks.
4. Claim the stamp duty exemption at the land stage. Eligible tourism units get 100 percent exemption of stamp duty and registration fee on the sale, lease or transfer of land, for the first transaction only, once during the operative period. Submit a bank guarantee in the prescribed format to the District Magistrate of the project district, valid at least until the date operations commence.
5. Build and commission the project, keeping invoices and audited records of every eligible investment component.
6. File the subsidy claim with the Department of Tourism after commercial operations start, with the CA-certified investment statement and the commencement certificate. The District Tourism and Culture Council, acting as the District Tourism Promotion Council, verifies investment proposals received at the district level.
7. Sanction follows from the state committees. The State Level Special Tourism Committee for all financial incentives and for capital and interest subsidy up to Rs 1 crore, and the State Level Committee chaired by the Infrastructure and Industrial Development Commissioner for capital and interest subsidy above Rs 1 crore.

How to track a claim

• The single window system linked to Nivesh Saarthi and Nivesh Mitra is designed to give increased transparency through application tracking and status checks, use the tracking number issued at registration.
• The State Level Policy Implementation Committee (PIU), chaired by the Additional Chief Secretary or Principal Secretary, Tourism, exists to ensure effective functioning of the single window mechanism, resolve queries and overcome hurdles. It includes the Department of Tourism's Command Centre, with a Project Management Agency and Project Monitoring Unit.
• The District Tourism and Culture Council in your district is the local body that verifies investment proposals and can tell you where a file sits.

Common reasons a tourism subsidy claim fails

• The unit is not registered with the Department of Tourism under the Tourism Policy 2022.
• Commercial operations have not started. The full subsidy is released only after successful commencement of operations.
• Ineligible investment components claimed. Only components notified as eligible count, and this is the most frequent source of a reduced sanction.
• Both capital and interest subsidy claimed. A unit claiming capital investment subsidy is not entitled to the interest subsidy.
• The same unit claiming across multiple tourism projects, which the policy bars.
• Incentives exceeding the 30 percent cap on the sum of all policy incentives.
• Stamp duty exemption claimed on a later transaction. The exemption is for the first transaction only, and can be availed once.
• Bank guarantee lapsed before operations commenced, in the case of the stamp duty exemption.

What else the Tourism Policy 2022 offers

• Conversion and development charges waived for all new and expansion tourism units, with leasehold tourism units allowed freehold status as per development authority rules. Where infrastructure such as road, drainage, sewage, electricity and water supply is absent, the developer provides it and files an affidavit to that effect.
• Employment generation subsidy to 100 percent reimbursement of the employer's EPF contribution for 5 years, for units employing more than 50 workers who are domiciled in Uttar Pradesh.
• Specially abled friendly units — payroll assistance of Rs 1,500 per month per worker, for a maximum of 5 such workers in a unit.
• Heritage hotels, capital investment subsidy for conservation, expansion, renovation and retrofitting, and 5 percent interest subsidy on scheduled commercial bank loans for eligible components, with the unit choosing between the capital and the interest route.
• Responsible tourism to 75 percent of the cost of an energy or water conservation audit up to Rs 1 lakh per unit once during the policy period; 20 percent of the capital cost of a sewage treatment plant up to Rs 20 lakh, for a maximum of 2 units a year; 50 percent of the certification fee up to Rs 10 lakh for IGBC, GRIHA or LEED green building certification; and 50 percent up to Rs 5 lakh for GSTC certification.
• ICT and innovation, up to Rs 10 lakh per event for digitally enabled travel marts and seminars, a one-time incentive of Rs 10 lakh or 25 percent of production cost for audio-video guides and digital publicity material for tour operators, and up to Rs 50,000 for new and innovative projects after commissioning.
• Marketing: up to 50 percent of space rent, capped at Rs 30,000 per national event and Rs 1,00,000 per international event, for a maximum of 20 registered tourism service providers a year and 3 firms per event.
• Art, culture and cuisine revival, a one-time grant of up to Rs 5 lakh to an individual or group conserving and reviving scarce or endangered indigenous art, music, craft, folk dance and cuisine within 50 km of a famous tourist destination, limited to 10 individuals or groups per year per division on a first-come-first-served basis, on the recommendation of the District Tourism and Culture Council.
• Research assistance of up to Rs 10 lakh to recognised travel and hotel associations, chambers of commerce and reputed registered NGOs.

Help and grievance redressal

• Department of Tourism, Uttar Pradesh at uptourism.gov.in: registration, eligible unit definitions and operational guidelines.
• Regional Tourism Officer and the District Tourism and Culture Council of your district, for verification of investment proposals and local facilitation.
• Nivesh Mitra at niveshmitra.up.nic.in and Invest UP at invest.up.gov.in for approvals, clearances and their helpdesk.
• UP Jansunwai (IGRS) at jansunwai.up.nic.in for a written grievance with an online tracking number.

One practical caution: several incentives in this policy are capped by number of beneficiaries per year to 2 sewage treatment plants, 20 marketing beneficiaries, 10 art revival grants per division, and are given on a first-come-first-served basis. For those, timing your application early in the financial year matters as much as qualifying for it.