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India Plans to Boost Travel by Cutting Tourism Taxes

Atheer – External Sources

India is planning to cut taxes on travel and tourism in next month’s federal budget and provide the $210 billion sector with more incentives, in the hope of boosting economic growth and creating more jobs.

According to Reuters, 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 more than ten percent between April and September, compared to around eight percent in the corresponding period of 2016. According to an industry report, tourism employs forty million people in India and could ten 10 million jobs within a decade.

“We’ll announce measures in the budget to promote investment in the tourism sector,” a top finance ministry official said, adding that Finance Minister Arun Jaitley favours lowering a 28 percent 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, Jet Airways and hotel operators such as Indian Hotels, which owns the Taj Mahal chain and EIH Ltd that operates the Oberoi hotels in India. Tour operators are also likely to gain.

Tourists in India on average pay thirty percent tax on hotel rooms and travel compared with less than ten percent in destinations such as Singapore, Thailand and Indonesia.

A further government official was quoted as saying that Jaitley was expected to lower income tax on corporate profit, offer tax incentives on hotel construction, as well as allocate more funds for new tourist trains and for building roads to various tourist destinations. The government will offer incentives to more regional airlines this year to cover new, under-served airports, he added.

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

Hotel occupancy levels in India are at their highest levels since 2008, even though many hotel chains have raised prices. The need for rooms has been spotted by foreign investors, with Japan’s SoftBank Group backing start-ups like OYO Rooms, which has emerged as the largest aggregator of budget accommodation across the country with hotels in over 200 destinations.

One major driver of the domestic tourism boom was last year’s launch of five regional budget airlines, which operate over 100 routes. The government has provided these airlines with incentives to offer cut-price flights to remote areas.

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