Inbound tourism suffers because of India’s tax structure

The report by the Committee said that the high tax rates and multiplicity of taxes made tourist packages of India overpriced compared to other competing destinations

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The Parliamentary Standing Committee for Transport, Tourism, and Culture, in its report, on ‘promotion of Indian tourism in overseas markets – Role of Indian overseas Tourist Offices and Indian Embassies’ has pointed out the many serious issues with the country’s tax regime which it said was one of the major reasons for India’s inbound tourism remaining “grossly under-utilised”.

ET reported that the Committee pointed out that high tax rates as well as multiplicity of taxes poses challenges to Indian inbound tourism from gaining its natural growth potential. The report by the Committee said that the high tax rates and multiplicity of taxes made tourist packages of India overpriced compared to other competing destinations.

The tax structure applicable to hotel accommodation, air travel, food and beverages consumption, etc., not only led to tourist packages being overpriced but also obstructed the seamless flow of tourists to historical sites. The Committee noted that despite inbound tourism being a major foreign exchange earner with foreign exchange earnings of INR 211,661 crore in 2019, the taxes levied on inbound tourism were among the highest in the world.

As for overseas promotions, the Committee asked for a more synergised and coordinated approach on the part of Tourism and External Affairs Ministries in identifying the potential markets for starting targeted promotional campaigns

The recommendations from the Committee included a “holistic review” of the tax regime applicable to the travel and tourism sector so that with suitable amendments India could convert its comparative natural and economic advantages into competitive advantages for the tourism sector.

As for overseas promotions, the Committee asked for a more synergised and coordinated approach on the part of Tourism and External Affairs Ministries in identifying the potential markets for starting targeted promotional campaigns. This was extremely important as the government has given the responsibility to promote Indian tourism to the Indian missions abroad.

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