The hospitality sector, which has thrived in the name of tourism all these years, is asking for a rollback of service tax on hotel rooms and restaurant bars with the plea that the additional financial burden would drive away foreign tourists, which would hurt employment.
Tour operators are also up in arms against the government for enhancing service tax on air travel. Airlines are seeing red but they seem to understand the compulsions of the finance minister to tax the rich.
"The proposal to introduce service tax of five per cent on room charges for hotels charging more than Rs 1,000 is a retrograde step and would keep foreign tourists away from India," said Vivek Nair, chairperson, World Tourism and Travel Council India Initiative, and vicechairman and managing director (MD), Hotel Leelaventure.
He said state governments like Kerala and Goa are already levying a luxury tax of 12.5 per cent on room charges and imposition of service charge on room tariff would amount to a multiplicity of taxes.
"In Kerala and Goa, the total amount of tax on the room charges would amount to 17.5 per cent, which in comparison with other competing tourism destinations like Singapore, Malaysia and Indonesia - which levy only three per cent - amounts to nearly six times the tax," Nair said.
"The tax for hotel and luxury segment has been substantially increased and, thus, would impact the overall growth of the sector," said Ankur Bhatia, executive director, Bird Group, a hospitality and aviation consultancy firm.
The three per cent additional levy on restaurants serving alcohol would render Indian hotels less competitive, further encouraging foreign tourists to visit other competitive destinations, hoteliers said.
"Already about 15 million domestic tourists leave India for foreign destinations and with this additional tax burden, the hotel room rates in India would go up and, thus, would further encourage Indians to go to foreign destinations," said Leelaventure's Nair.
Similarly, tour operators feel that the Rs 50 rise in service tax on domestic economy class airfare to Rs 150 and the Rs 250 hike on international economy class airfare to Rs 750 would hit air travel.
Courtesy: Mail Today