Travel and hospitality sector in the country will be hit by the government's decision to increase service tax to 12 per cent as it will result in spike in costs, according to tour operators. We expect tour prices to increase due to the cascading effect of the service tax increase resulting in an adverse impact on the travel and tourism industry as a whole.
The Indian Association of Tour Operators (IATO), which has been asking the government to do away with the 10 per cent service tax charged earlier, was taken aback by the decision.
"We are shocked to see that more areas have been included for service tax which has bearing on tourism," IATO President Subhash Goyal said. He said the increase in tax burden will make India uncompetitive as compared to countries like Thailand, China and Malaysia.
It may be noted that in the Economic Survey 2011-12, the government had suggested various measures to promote India as an attractive tourist destination.
Commenting on the impact of increase in service tax on air travellers, Pearl International Tours and Travel (PITT) Executive Director Arjun Seth said: "Airlines will pass on this cost increase to travellers making tickets more expensive."
However, maintaining a positive outlook he said: "I don't foresee any change in growth rates for the industry because such a marginal change will not deter people from traveling either for business or leisure."
It may be noted that in the Economic Survey 2011-12, the government had suggested various measures to promote India as an attractive tourist destination.
Commenting on the impact of increase in service tax on air travellers, Pearl International Tours and Travel (PITT) Executive Director Arjun Seth said: "Airlines will pass on this cost increase to travellers making tickets more expensive."
However, maintaining a positive outlook he said: "I don't foresee any change in growth rates for the industry because such a marginal change will not deter people from traveling either for business or leisure."
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