India plans lower taxes to boost tourism

New Delhi: India is planning to cut taxes on travel and tourism in next month’s Union Budget and give more incentives to the $210 billion sector, government sources said, hoping to boost economic growth and create more jobs.

The move could add to a domestic tourism boom in the world’s second most populous nation, where low inflation and rising incomes are changing lifestyles and consumption patterns of an estimated 250 million middle-class Indians. With scores of destinations introduced on airline routes last year, air travel is also surging.

India’s tourism sector grew over 10 per cent in the six months ending September, compared to near 8 per cent in the year-ago period. 

According to an industry report, tourism employs 40 million people in India and could add 10 million jobs in a decade.

“We’ll announce measures in the budget to promote investment in the tourism sector,” a top finance ministry official told Reuters, adding that finance minister Arun Jaitley favours lowering a 28 per cent tax on hotel tariffs, and offering incentives to attract private investments.

If the moves come about, companies expected to benefit include airlines like IndiGo, owned by InterGlobe Aviation, and Jet Airways and hotel operators such as Indian Hotels, that owns the Taj Mahal chain and EIH Ltd that operates the Oberoi hotels in India.

Tour operators including Cox & Kings and Thomas Cook are also likely to gain.

In India tourists, on average, pay 30 per cent tax on hotel rooms and travel compared with less than 10 per cent in Singapore, Thailand and Indonesia, said Pronab Sarkar, president of the Indian Association of Tour Operators (IATO).

Another official said the budget was likely to “significantly” raise allocations for tourism infrastructure and raise income tax exemptions on investments in new hotels.

A third official, who is aware of the finance ministry’s pre-budget consultations with industry groups, said Mr Jaitley was expected to lower income tax on corporate profit, offer tax incentives on hotel construction, allocate more funds for new tourist trains and building roads to tourist destinations. The Centre will offer incentives to more regional airlines this year to cover new, under-served airports, the official added.

All three officials, who spoke on condition of anonymity, declined to provide numbers or share further details.

India needs about 200,000 new hotel rooms, Tourism Minister K.J. Alphons told parliament this week.

“We have reached a plateau point and need more resources to create new infrastructure and develop tourist packages,” Alphons later told Reuters, adding there was huge potential in developing areas that were not the usual tourist destinations.

The Prime Minister has said developing tourism, particularly in India’s north-eastern states, is one of his top priorities.