The Contribution of Hospitality Industry To Economy Growth

By:Vandita Jadeja 2017-06-02

The tourism and hospitality industry in India has been witnessing a healthy growth and accounts for7.5% of the GDP of the country. According to a KPMG report, the hospitality sector is expected to grow at 16.1% CAGR and will reach Rs. 2,796 thousand crore in 2022. With an increasing middle class and disposable income, this sector has been witnessing a positive growth for a few years. The sector is a major job provider across the terms, directly as well as indirectly. It also attracts the most FDI inflow and is an important net foreign exchange earner for the country. The hospitality sector is a major contributor to the indirect tax revenues at the State as well as the Central level, which includes revenues from Service Tax, VAT and Luxury Tax. 

India is dominated by the potential of tourism, this growth is expected to continue in the future as well. However, hospitality is still one of the most heavily burdened industry in terms of taxation. With multiple layers of tax, the sector is weighed down by the compliance costs and the regulatory requirements. With the high rates of GST, the industry will have a huge impact in the coming year. It will reduce the profitability and increase the amount of taxes paid by the sector.The sector is not happy with the GST rates as it could lead to a fall in the tourism industry and hamper the growth rate. A lower rate of tax could increase the customers in the industry and also reduce the cost of compliance for the players. Infrastructure development is the backbone of the hospitality sector. Taxes on the real estate development must be lowered to boost investments due to the acute shortage of quality accommodation. With an increase in the infrastructure development, the sector will see a rise in income.

It is expected that India will be the fastest growing nation across wellness tourism in the coming five years, which means adequate infrastructure development will be critical to achieve the same. With the right incentives, the Government will be able to provide the required boost to the sector across India.The GST rates should be adjusted so as to give a boost to the luxury hotels across India, with the different rates set for the different type of hotels, the hospitality industry is in dismay.

Apart from that, the hospitality industry has a reciprocal relationship with other sectors like transportation, entertainment, aviation, etc. and strengthening these sectors will lead to the development of the hospitality industry. A single window clearance for real estate and hospitality projects are much needed steps for the achievement of growth of the industry.

The hospitality sector has a huge potential to become the driving force of the economy. But it will be possible only with the right incentives from the Government and the support to the industry.A single rate for GST can go a long way to stimulate the growth across the industry. A strong growth of hospitality industry can make India competitive in the World.
 

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