TravelBiz Monitor

Guest Column

Thursday, 31 October, 2019, 14 : 54 PM [IST]
Reduction in GST is a silver lining, but there is more to achieve

Tourism is the backbone of our economy and there is no better proof of this than the fact that tourism generates one out of 11 jobs in the country. An integral element of tourism, the hospitality industry, is growing rapidly wherein new hotels are coming up each day. The ratio of demand and supply – tourist flow versus hotel rooms is a delicate equilibrium that is currently balanced and is growing in equal proportions. In fact, contrary to what many people think, it would be nice to have more hotels as I firmly believe that the supply creates its own demand. However, in the recent past, a deterrent that was holding people back from opting longer stay at hotels was the unusually high GST (Goods and Services Tax), which when added was almost doubling the cost of their stay from its original amount.

After creating much noise about it at various platforms, it was indeed heartening to note the reduced tax rates, which have been recently announced by the GST Council. This move will surely give a boost to the economy. The voice of all the influencers has been heard and that too before the peak season of winter break when people plan their holidays both domestically & incoming. The reduction is appreciated mostly by the budget travellers as they shall be benefitted immensely. It will give them a chance to enjoy outings to small restaurants and budget hotels to help and thus help the industry to not only grow, but enable them to enhance their service quality and standards on a regular basis.

However, one needs to keep in mind that the markets are dynamic and ever evolving and even though this is a welcome move, there is still room for the market to reach a mature stage. Therefore, the ultimate requirement or solution is to have very low or nil GST structure.

The reduction at 18% is still on the higher side but can certainly be seen as a silver lining. We need a more transparent system to monitor the GST rates and credit input. The hotel room tariffs need to strictly follow the slabs and be priced carefully for the affordability of all. While it is expected that slashing of GST on room tariff from 28% to 18% is surely going to bring a relief to the sector, the hospitality industry needs to bring their basic room rent down to fall in this 18% bracket, and not stay in the 28% tax zone.

With tourism, everything develops, be it, infrastructure, employment, economic growth, food, shopping, transport, etc. India's Tourism and Hospitality industry is set poised to grow to USD 280.5 billion by 2025. By strong implementation and closing prevailing loopholes, the initial setbacks in policy implementation can surely be overcome. The reductions have been received well by the stakeholders and let's hope that this move augments the tourism and hospitality sector, and bring it back from the pangs of economic slowdown.