The Federation of Associations in Indian Tourism & Hospitality (FAITH) has expressed its concerns to the finance Minister, Arun Jaitley, in a letter documenting major impediments, following the proposed tax slabs to the industry.
Under the proposed GST rate slabs, hotels and similar accommodation with a rate of above Rs 5000 have been classified as luxury and put under a newly created bracket of 28% for services. In addition, for consumption in restaurants in a property which is classified as 5 star and above, the GST rate has been pegged at 28%.
In light of the above, the communication touched upon major aspects that augmented concern and warranted consideration according to FAITH.
FAITH stated that upon implementation, this slab will make India hugely uncompetitive while quoting rates in the global market, said.
FAITH stated: "We compete in the global marketplace with countries such as Thailand, Malaysia & Singapore. Thailand has a consolidated indirect hotel tax rate of 7% & 17.7% on restaurants. Singapore has a hotel vat of 7% & 7% on restaurants. Malaysia has a hotel vat of 6% & a 6% on restaurants. A 3-day stay by a foreign tourist at a daily rate of $150 (assuming hotel and food & beverage) will be taxed per night in India at $42 (not including cesses), $18 in Thailand (weighted average), of $10.5 in Singapore, $9 in Singapore. That implies on a total stay 3 nights, for one person, India now becomes expensive by $72 vs Thailand, by $95 vs Singapore and by $100 vs Malaysia."
According to FAITH this difference will get compounded, when Indian companies, bid for global conferences and events and large tour groups which come to India. "For a visiting conference of 100 people, India now becomes $7200 more expensive than Thailand, $9500 than Malaysia & $10000 than Malaysia. This difference will further get compounded as most of the groups normally stay post conferences for 7-10 days and travel around the country. These travellers are now most likely to give India, a miss,"FAITH stated.
While benchmarking itself to other countries, FAITH highlighted that China is estimated to get 55 mn foreign tourists and $50 bn in foreign exchange, USA 70 mn foreign tourists and $170 bn in foreign exchange, Spain 60 mn foreign tourists and $61 bn foreign exchange, France 85 mn foreign tourists and 57 bn in foreign exchange. Their indirect rates are highly competitive. China's hotels and restaurants have a vat of 6%, for USA it is 15% and 7% respectively, for France its 10% across both the categories and for Spain it is 7%. Clearly India is at a disadvantage.
The document further expressed that a levy of 28% has the potential to create unprecedented damage to the tourism industry from which India will find it extremely difficult to recover.
"The overall impact of all of the above on our foreign exchange earnings, reduced stays in Indian hotels and lost investment attractiveness of hospitality & tourism as a sector will result in large scale unemployment. The clubbing of the hospitality industry with the likes of gaming & racing in the same GST slabs, which are speculative and do not contribute to nation building has already dealt a major jolt to the investment community,"read the statement from FAITH.
The note also made reference to the visit of the author of the legendary thesis of 'comparative advantage of nations' Mr. Michael Porter who had been invited by NITI AAYOG for sharing his thoughts.
In view of the above, FAITH has requested the Finance Minister to reassess the rating of 28% on hotels and other accommodation, of ? 5000 and above and on restaurants at 5 star hotels and bring it down to the rate of 18% GST on 'actual rates' charged.
Source: economictimes.indiatimes.com