KOCHI: The tourism industry in Kerala, which is known for its high value travel, is in a state of shock after the peak tax rates proposed for the sector in the Goods and Services Tax (GST) regime.
The GST has fixed the highest tax bracket of 28 per cent for hotels which charge over `5,000 a night, up from the prevailing 12-18 per cent. The highest tax slabs are also applicable to restaurants which have air conditioning and serve alcohol.
“The GST rate of 28 per cent has come as a shock and will be a major setback to tourism in India. Particularly hit will be states like Kerala which rely on tourism to create livelihood opportunities,” said Jose Dominic, an industry veteran and CEO of CGH Earth.
Nearly 10.40 lakh foreign travellers had visited Kerala in 2016 and the higher taxes will prove fatal to the state-- which is among the destinations recently named by the Association of British Travel Agents (ABTA) as one of the 12 global tourist hotspots to keep an eye on-- the only destination in Asia to be included in the list.
“This (inclusion) is a significant achievement for Kerala and indicative of its ability to attract travellers who can have a significant beneficial impact on the destination. The 28 per cent GST will specifically hit the traveller Kerala has been able to attract,” he said.
E M Najeeb, chairman, ATE Group, said,”Nowhere in the world, hotel rates are taxed at 28 per cent. An average of 10-15 per cent is most appropriate for the sector.” (see chart) “When a tourist comes to India, he’s taxed on air tickets, then he’s taxed on foreign exchange conversion, another tax for rooms, then when he goes out to a restaurant he’s taxed again.
In a nutshell, a tourist’s costs goes up by over 50 per cent for the convenience he enjoys,” said Najeeb. He said the tourism industry has taken up the matter with the Finance Ministry.
According to Nakul Anand, chairman of Federation of Association in India Tourism & Hospitality, the levy of 28 per cent has the potential to create “unprecedented damage” to the tourism industry, which India will find extremely difficult to recover from.
“With rising terror threat to global travel, an ageing population in key markets, increasing unemployment from digitisation, imposing such tax driven financial barriers to travel to India will be a big ‘hit wicket,” said Anand.