Higher GST on service sector to cause major setback for tourism industry: HRAWI

With concern for the tourism sector, the Hotel and Restaurant Association of Western India (HRAWI) has said that the government's four-tier structure of Goods and Services Tax (GST), in which the service sector will be taxed at 18 per cent, will cause the tourism sector a major problem.

HRAWI President Dilip Datwani said that the it was estimated that the lower GST rate of 5 per cent will contribute to a decrease in their Current Account Deficit, increase in the GDP, doubling up of both foreign and domestic travel and also doubling up of tourism induced employment, across each state and nationally. He added that India's tourism competitors in South East Asia (excluding Japan and China) earn among themselves over $150 billion in foreign exchange and attract almost 100 million tourists annually. Further, as per the estimates, a GST rate of 5 per cent will more than double both foreign travel coming to India to 20 million tourists and domestic travel within India to 2.5 billion.

On other hand, HRAWI former President Kamlesh Barot said that they have accepted the 5 per cent tax slab on food, which is a positive outcome of subsumed taxes for hotels and restaurants. However, the 18 per cent levy on services or room revenue in our case, compared to India’s neighboring countries which charge a Tourism tax between 4 to 7 per cent, rules out fair competition. This will have a negative impact, as a foreign tourist planning a trip across Asia may entirely skip India or spend fewer days in India on account of these perceived high room rates. Recently, the GST council has finalized the GST four tier rate structure of 5, 12, 18 and 28 per cent that aims to lower tax incidence on most goods and keep out essential items. In this the service sector will be taxed at 18 per cent.