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India: GS Impact on tourism sector and employment

In India, Travel & Tourism accounts for 5.9% of the GDP and 9.2% of the total employment. The total number of jobs (direct & Indirect) in the tourism sector in 2016 is about 54 million and it is expected that in every 10 person there will be one tourism professional in job scene and could be more if tourism gets due priority and additional funds are given in Tourism Budget in 13th Five Year Plan onwards ie (2017-22) onwards).

Our sector estimates about 80 million jobs by the end of the 12th Five Year Plan our Travel and Tourism sector is estimated to create 78 jobs per million rupees of investment Compared to 45 jobs in the agriculture sector and 18 in the manufacturing sector for similar investment. Along with construction (infrastructure related tourism activities), it is one of the largest sectors of Service Industry in India.  An additional employment of 25 million (direct and indirect) is likely to be created in every nook and corner of the country by the end of the 12thFive Year Plan.

There is a need for diversity of actions from Micro to Macro level including product and infrastructure development, Marketing, Branding promotions, Manpower planning, Policy and Investment. according to Pronab Sarkar, president, Indian Association of Tour Operators.

 

Unfortunately lip sympathy continued in all previous plans sector with taxes –Service Tax, Luxury Tax, VAT, Road Tax, Toll Tax, Excise and so on & even double taxation which was killing tourism. Trade was very optimistic that with the introduction of GST, one tax regime will benefit tourism sector. But it proved just opposite. The main objective of introducing GST was One Nation and One Tax to avoid cascading effect and double taxation.Sarkar said in a statement.

With highest taxes on tourism under GST which was never there in earlier Plan Period has dwindled tourism investments and growth. This has dampen the interest of even holidayers to choose India as holiday destination. Investors preferred to run away with GST confusion and legalities involved.

However, what is loss to India has been taken as an opportunity by our neighboring countries like Thailand, Malaysia, Singapore, Sri Lanka etc., where taxes on tourism sector varies from 6 to 10% only (where as India leads the way with average tax percentage of 23 to 25%) So job creation which was focused on introduction of GST became a wild dream.

Urgently the situation needs revision and correction. Several recommendations highlighting the steps to be taken to boost tourism given to concerned authorities but remained only on paper. These are mainly 2 Points which are as under:-

  1. We request that a deemed value equal to 10% of total bill amount charged by the tour operator may be fixed on the same lines as in case of air travel agents under rule 32(3) of CGST Rules, 2017. We feel that the above provision determining the taxable value of services provided by the tour operators will meet the  ends of justice facilitating the service provider to pay GST at the rate of 18%  on 10% deemed value, making the effective rate of 1.8% of the gross billing (without ITC).
  2. In case the Government do not agree to the solution suggested in para 1 above, the Association prays that like transporters and rent-a-cab operators, limited ITC in respect of GST charged by a tour operator may be made available to another tour operator availing services from former tour operator in the same line of business.
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