The hospitality industry took a hit for two years due to the COVID-19 pandemic. While hotels, airlines, tour operators and the like suffered heavy losses during this period, they have finally managed to bounce back as travel and tourism resumed to near pre-COVID levels.
However, one thing the hospitality industry is still unhappy about is the high GST rates levied on hotel rooms. Business leaders in the field argue that the sector generates a huge number of employment opportunities each year. But, they can continue to grow and do so only with the support of the government, and that includes lower indirect tax rates. Currently, GST is charged at 12% on hotel rooms with a tariff of up to Rs.7,500 and 18% for rooms priced higher than Rs.7,500. The demand of the industry this Budget 2023 is for all rooms to be taxed at 12%.
The ultimate goal of the hospitality industry is not just lower tax rates but also for full set-off of input tax credit, in line with global standards. At present, input tax credit can only be claimed if the hotel booking is made in the same state where the business is registered.
The second expectation from the tourism industry is to make e-visas free for a certain period or a certain number of tourists to boost the growth of tourism in the near future. This can be promoted further by marketing initiatives for wellness tourism as well as by introducing policies to incentivise hotel openings in remote regions like northeast India.
The tourism industry is also hoping that the government will make policy changes to help hospitality businesses avail of cheaper loans with a longer moratorium period. Another expert in the industry also expats that Budget 2023 announces a single-window clearance for hotel projects. Currently, hospitality companies are required to obtain multiple approvals and licences before they are scheduled to operate. The expert suggests that the government should fast-track this process and bring all approvals and licences under a centralised approval system.
Last but not least, similar to the boost for the electric vehicle segment in India, the government needs to promote the usage of renewable energy resources in the sector. Would Budget 2023 meet these expectations?
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