Indian tourism industry would receive a boost from reduced tax rates

Indian tourism industry would receive a boost from reduced tax rates

Business Development

Mohammed Abdul Moiz

Mohammed Abdul Moiz

349 week ago — 3 min read

India is a nation that has a lot to offer by way of tourism. There are natural parks, historical sites, and all sorts of scenic landscapes from mountains to beaches. India’s potential as a global tourist destination is unquestionable. However, that potential has never truly been realised while neighbouring countries like Nepal, Sri Lanka and Bhutan have made significant strides in this sector.


In the past few years it can be seen that Indian tourism industry is going through a lean period, due to an ageing destination brand, low traveller demand and constant assault from taxation. Much has changed in the industry. 


Since the GST has been introduced, within the tourism fraternity there is still confusion, and clarity is awaited. Costs have been increased on tourism services and this could affect vacationers coming into India. Indian tourism is seeing a decline in arrivals from tourists from the main source markets.


The new rule regarding GST for tour operators is to charge 5% on the whole package cost which is already heavily taxed. If there is no input credit in the package then the mandate is to charge the amount on top. The cascading effect on tourism remains as it was with multiple taxes during the service tax regime. On the other hand hotels have been given 28% GST on a tariff of over Rs. 7500  per room per night, which should ideally not be more than 18%. 


So the total impact on tour operators product is becoming 25% GST on the whole package which is among the highest tax rates on tourism in the world. With the rates India has, our neighbouring countries lure tourists away who would potentially have visited India. Gradually jobs will be lost and this would be a loss for people who are making a living in this sector.


Lower tax slabs will help grow the tourism industry and will also generate employment opportunities in the hospitality industry that would have a beneficial effect on the economy.


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