Rationalise taxes, Tourism Ministry tells states

Rationalise taxes, Tourism Ministry  tells states

Ministry of Tourism is pushing for the rationalisation of taxes levied by government on various tourism services, which, it believes, would spur the sector that witnessed a “significant growth” in recent years, both in terms of foreign and domestic tourists.

At a recent meeting here, the Ministry requested all the state governments to review their tax regime and rationalize it, saying the multiplicity of taxes was one of the “major bottlenecks” in achieving the full potential of the sector.

“We are also taking up the issue of the rationalisation of central taxes with the Ministry of Finance,” official sources in the Ministry told Deccan Herald.

The sector has been witnessing an “encouraging growth” in the past decade, both in terms of foreign tourist arrivals and domestic tourist visits.

“Since tourism in the country has to remain competitive for its growth, it is important that the state governments and union territory administration review their tax regime and rationalize it. Rationalizing tax structure no doubt will ensure long-term sustainable growth for tourism sector,” sources said.

For each service consumed by the domestic and foreign tourists, the tax structure varies from state to state in the country. The collective taxes like value added tax (VAT), service tax and luxury tax range from 25-30 per cent for hotel accommodation, 20-60 per cent for food and beverage, 20-25 percent for road travel.
“The same is true for air travel and other services,” sources said. 

Contrary to the tax regime in India, the collective taxes on tourism services range between 5 to 7 per cent in the competing nations like Thailand, Malaysia, China and Singapore.

The multiplicity of taxes and higher bracket of taxes makes tourism services costlier and non-competitive in India. They become “more burdensome” on the tourists if the taxes charged on printed tariff of hotels and not actuals.

 “The present tax structure, in addition to making the packages costly, obstructs the seamless movement of tourists across the states. This needs to be addressed to achieve the full potential of the sector,” sources added.

Last year, a parliamentary standing committee had also favoured rationalisation of taxes on tourism services, observing that the varying tax structures in states had been obstructing the potential growth of the sector in the country.

In its report, the panel had recommended that taxes should be made “uniform and globally competitive”.

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