Mumbai: The Hotel and Restaurant Association of Western India (HRAWI) on Monday said the government's four-tier structure in Good and Services Tax (GST), in which the service sector will be taxed at 18 per cent, will cause the tourism sector a major setback.
In the recently-concluded meet on GST, the government has declared a four-tier structure of 5, 12, 18 and 28 per cent, of which the service sector will be taxed at 18 per cent. (Also read: How GST could impact your wallet)
"It is estimated that the lower GST rate of 5 per cent will contribute to a decrease in our 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," HRAWI president Dilip Datwani said.
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, he said.
According to 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.
"We welcome 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 our neighbouring countries which charge a Tourism tax between 4 to 7 per cent, rules out fair competition," former HRAWI president Kamlesh Barot said.
Overseas, he said, GST can have least slabs as "they have minimum exclusions unlike ours".
"A foreign tourist planning a trip across Asia may entirely skip India or spend fewer days in our country on account of these perceived high room rates because we also don't refund taxes to foreigners like many countries do," Mr Barot added.
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