Hospitality industry hoping for Service Tax exemption in this upcoming budget

The past few months have seen some major changes in our economy. The demonetization issue is bound to have a long term impact across all sectors of the economy including the travel and hospitality industry as well. This sector is pinning its hopes on the budget providing service tax exemption and boost to digital and physical infrastructure.

Tourism and Hospitality industry: One of the largest employment generator of the country 

The Hospitality and tourism sector is among the largest employment generators. It is also the third largest foreign exchange earner. The industry contributes about 7.5% of GDP. Factors that boost the performance of the industry are increased travel spending among millennial due to rising disposable income and affordable air fare. International brands too are experiencing an exponential growth, thanks to expansion of the e-visa scheme in the country. According to travel experts the recent trends have resulted in definitive rise in spending capacity and aspiration for premium brands and luxury hotel brands in India.

The hospitality sector players are of the opinion that any exemption in the service tax coupled with the relaxation in income tax slabs for salaried class would indeed improving tourism. Further we could also see major steps being taken to improve the infrastructure sector of India, which will boost the tourism sector further. 

GST issue the travel perspective

It is likely that the Goods and Service Tax (GST) will be operational from July 2017. This major change is expected to have a major impact on various sectors in different ways. When it comes to the travel and hospitality sector experts feel that the single window clearance with GST and friendlier taxation for airlines and passenger surcharges will further improve the industry. Most experts in the sector feel that GST Bill will eliminate multiple levels of taxation. It will also standardize business practices. The lengthy approval process with the implementation of GST will be shorter. Thus it will speed up the project execution in the hospitality sector.

At present, Indian consumers have to pay double tax on outbound holidays. This is because, they have to pay service tax in India and also local GST/VAT of the visiting country. Most of the tour operators opine that imposing tax only on Indian component of the tour will reduce tax burden on the Indian travelers. It will thus increase spending. Some of them even claim that the government should fix GST rates taking into consideration GST/VAT being levied by neighbouring countries.

Overseas travel was hit but steps to restore it needs to be initiated

After demonetization, the travel and hospitality industry was one of the worst hit industries. The reasons for this are that of the huge cancellations and drop in bookings. Many overseas travelers cancelled their travel owing to the severe cash crunch. So in order to make good the damage the government needs to implement measures to boost cashless transactions across the country. This would help make travelling across the country faster and easier.

To conclude we can say that these are tough times for the Indian tourism industry. But with steps from the government to boost the sector it is being hoped by the experts in the sector that things should revive in the recent future. To stay updated in the sector please keep following our blogs.