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Insurance Article

Taxation might Cripple Travel Industry Growth!

May 07 2012

It's yet again the same old story! The ingenuous negligence of the travel and tourism industry of India towards the yearly budgeting exercise! It is a classic situation of incompatibility in words and actions at the uppermost level. Now this attitude might create a lot of problems for tourism sector while achieving targets set for the 12th Five-Year Plan.

The basic theme behind the 12th Five-Year Plan set by the Planning Commission of India is super-fast, consistent and comprehensive progress. The plan values tourism industry as an important service industry just as other prime sectors including IT and ITES. This might help in achieving the targets of consistent economic progress in the next five years.

Even though tourism as a service sector in India has shown dynamic growth of over 8% in the last five years (which is definitely not a big number), the Planning Commission of India genuinely feels that the industry having achieved the kind of growth in business sans support by the government and incentives holds potential to achieve faster growth in the future to be recognized as one of the important economic development drivers by the next plan period.

Tourism, just as any other service industry, is driven by the private sector. The basic role of government both at the centre and states is restricted to forming various policies and assistance in terms of identification of destinations and setting basic groundwork. There have definitely been efforts such as the branding of Incredible India as well as marketing exercises they haven't fructified in growing incoming to anticipated numbers due to numerous infrastructural and policy blockages. In spite of its potential, India tourism has never received support in terms of policy-level from the government. In fact, tourism is considered an exclusive indulgence and the management has been exploiting the industry for taxes and levies. The increasing tax on tourism services in India nowadays is between 25 and 30 per cent with negligible differences among states.

The Finance Minister has raised Service Tax by two per cent. It has now become 12 per cent from 10 per cent. The standard rate of Excise duty has also been raised from 10 per cent to 12 per cent. Unfortunately, this additional tax will also make tourism products costlier in the nation.


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