INDIAN MARKET
ANALYSIS IN TOURISM AND HOSPITALITY INDUSTRY
Hospitality industry provides accommodation
& entertainment services, accounting food and beverage, event management
and above all guest satisfaction.India has been recognized as a destination for
spiritual tourism for domestic and international tourists. Contribution by
travel and tourism sector to India’s GDP has been growing and Indian Government
always makes serious efforts to boost investments in tourism sector. For the growth in this sector, 100 % FDI is
allowed through the automatic route in the hotel and tourism sector
The Indian government has also
released a fresh category of visa - the medical visa or M visa for attracting
and raising medical tourism in the country.
PREVIOUS TAX
STRUCTURE
In the previous tax regime, the
hospitality industry was plagued by multiple taxes viz. Service tax, VAT,
Luxury tax etc. leading to cascading effect.
-
The
VAT varied from state to state-ranging between 12% to 14%.
-
Luxury
tax on the room tariff and the state-ranging between NIL to 12%
-
Service
tax varied on the type of service-
·
hotels
with tariff in excess of Rs.1000
·
S.
tax applicable at 60% of tariff+VAT+Luxury tax
·
In case of restaurants on the F & B
bills-Service tax applicable at 40% of the bill + VAT.
Combination of all gives total of
20-27%. Also input credit from central taxes cannot be set off against VAT and
vice versa.
IMPACT OF CURRENT
TAX STRUCTURE
In
hospitality sector, GST registration is
mandatory for those who exceeds the thresholds limits prescribed by the
government.
1.
The
GST on 5 star and other luxury hotels with expected rate of 18%which had been
reduced from 28%subsume all of these taxes and bring them under one single tax.
This is reducing multiple taxation and giving a boost to the hospitality and
tourism industry.
2.
The
effect of GSTis positive leading to a considerable reduction of tax ranging
between 1-7%.
3.
Lower
tax rate attracts more tourists in India.
4.
Consumers
also getting the benefit with the single slab of tax as multiple components in
the food bill in the present structure inflate the bills by 30-35%.
5.
Claiming
of input tax credit has become easier in comparison to the old tax structure.
Overall GST is positive
for the sector assuming the multiplicity of taxes will go away.
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