Hotel Industry Welcomes 5% GST On Food But Warns Tourism Will
Stifle At 18% GST On Rooms
Mumbai: In the recently concluded meet on Good & Services Tax
(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. To this, the
Hotel and Restaurant Association of Western India (HRAWI) has warned that
tourism could witness a major setback. Citing a recent study conducted by the
Organization for Economic Co-operation and Development (OECD) on the impact of
taxes on competitiveness of tourism, it has highlighted that most nations
recognize tourism as a critical economic driver and follow a Tourism Rate (TR) which
is lower than 50 per cent of the Standard Rate (SR) on other sectors.
 |
| Dilip Datwani, President, HRAWI |
“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,” says Mr Dilip Datwani, President, HRAWI. “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.
It is estimated that a GST rating of under 10 per cent will enable India to
increase its price competitiveness and target an additional 10 per cent of this
market in the short to mid-term, and up to 20 per cent of this market in the
medium to long term. This implies an increase in our foreign exchange earnings
from tourism from the current $20 billion to approximately $35 billion in 3 to
5 years and to approximately $55 billion in 5 to 7 years,” he adds.
The study also estimates that 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.
“Indian tourism industry is
estimated to be the size of around 2 lakh crores directly and generating an
economic multiplier of up to three times the amount. It is driven by over 8
million foreign tourists and by over 1.3 billion domestic tourists. A lower GST
has the potential to increase our total economic impact to over 10 lakh crores.
This has the potential to increase our total share of GDP to more than 10 per
cent against the present 5.5 per cent. The global average GDP contribution from
tourism is 14 per cent while in China alone it is at 9 per cent,” adds Mr
Datwani.
Tourism is one of the biggest
revenue generators of Foreign Exchange to India. Every foreign tourist spending
an additional day in the State of Maharashtra alone translates to an
incremental revenue of Rs.600 crore which benefits not just the industry but
also means additional revenue to the government coffers.
“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. Abroad, GST can have least slabs as they have
minimum exclusions unlike ours. However, in India, breaking down the GST into
tiers for simplifying the rates at which different goods will be taxed is not
turning out to be favourable to tourism. 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,” says Mr Kamlesh Barot, past President, Federation of Hotel and Restaurant Associations
of India & HRAWI.
Hospitality is one of the biggest
drivers of employment in India generating 5 crore jobs directly and indirectly.
It absorbs over 7 per cent of skilled, unskilled and semi-skilled workforce.
“It is also estimated that a lower
GST for tourism will easily double the jobs in this sector of the employable to
9 per cent from the present 4.5 per cent. This will prevent unplanned urban
migration and create livelihood across the hinterland. Tourism has the
potential to increase contribution to employment to over 10 per cent. We are
still hopeful that the Finance Minister will reconsider and provide a tax rate
like the Tourism tax rate applicable in most countries,” concludes Mr Barot.
About Hotel &
Restaurant Association Western India (HRAWI)
The Hotel and Restaurant Association (Western India)
is a 66 years old Association of Hotels and Restaurants in Western India. Its
members include smaller Hotels up to 5-Star Deluxe categories. The bulk of its
members like any growth economy are made up of budget hotels. HRAWI covers
Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and the Union
Territories of Daman, Diu & Silvassa, and is considered to be the voice of
the Hotel Industry. The association is part of the national body of Federation
of the Hotels & Restaurants Associations of India (FHRAI), located in New
Delhi, which was originally founded in Mumbai in 1950 by the late Mr. J.R.D.
Tata.
For more
information about the association please visit: www.hrawi.com
