Indian tourism industry protests service tax

Wednesday, 19 March 2003, 08:00 Hrs
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NEW DELHI: India's tourist industry has protested an eight percent service tax on tour packages, with one expert warning the country could be pricing itself out of the global market.

Tour operators complain the new tax, levied in the budget for fiscal 2003-04, would nullify the benefits from the withdrawal of the 10 percent tax levied on services in the hotel industry.

They also admit to waking up late to the new tax, saying Finance Minister Jaswant Singh had not highlighted it when he presented the budget in Parliament on February 28 and they came upon it when studying the document in detail.

"On the one hand, the government has announced plans to remove the 10 percent tax on services in the hotel industry. It has also decided to levy an eight percent tax on tour packages sold to overseas visitors in foreign currency. This would be detrimental for the growth of tourism," Maharaj I.S. Wahi, president of Indian Association of Tour Operators (IATO), contended at a press conference Tuesday.

Lending voice to IATO were industry bodies representing domestic airlines, the hospitality industry, domestic tour operators and surface transport operators.

"India is pricing itself out of global market," warned K. Damodaran, vice-president (Marketing and Sales) of Sahara Airlines.

The new levy is being introduced as the value added tax (VAT) that comes into force from April 1.

"It would double the burden of tax on overseas visitors as, in place of just the entertainment tax in hotels, the entire package including travel, hotel stay and domestic travel would now be taxed," held Jyoti Kapur, president of Association of Domestic Tour Operators of India.

Saroj K. Datta of Jet Airways said the budget did not provide any relief to the tourism industry, which was already burdened with 16 percent excise duty on aviation turbine fuel and 15 percent air travel tax, making air travel very expensive.

"Unless these two levies are either withdrawn or reduced, domestic air travel in India will continue to be priced higher than anywhere else. While airfares have been going up to meet the increasing cost of fuel, the yield has been going down," Datta said.

The slew of taxes in India were making marketing of tourism packages very difficult, said Vikram Madhok, managing director of Abercrombie & Kent Inc, a major U.S. tourism company and chairman of Indo-American Chamber of Commerce.

"If the present trend continues, U.S. tour operators will be forced to re-look at whether to include India in their tour packages."

Holding there was no rationale between the government's avowed intention of boosting tourism and the hurdles it is placing in its growth, the industry representatives urged the finance ministry to review the proposal for the new tax.

Against a tourist inflow of eight to 10 million in countries like Indonesia and Malaysia and even China, which has started promoting tourism only in the last few years, India received the highest number of 2.5 million tourists in 2001.

"Unless efforts are made to develop sustainable tourism, India will become a totally uncompetitive market," warned Sarabjit Singh, president of Indian Tourist Transporters Association.
Source: IANS
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