India's meetings and events industry received a huge boost following the government's recent announcement to cut taxes on hotel rates.
The country's GST (goods and services tax) council, chaired by finance minister Nirmala Sitharaman, approved the proposal to revise tax rates on hotel rates in order to meet the targeted growth for the industry.
The move is seen as a boon to the sector, which has been reeling under pressure of an economic slowdown. The move is also expected to serve a dual purpose of boosting tourism and generating more employment for locals.
Cuts to Hotel Costs
The new rules will see a tax reduction from 28 percent to 18 percent for hotels having room rates of more than Rs7,500 (US$105) per night. For hotels with room rates less than Rs7,500, the tax has been lashed from 18 percent to 12 percent.
In addition, there will be no GST on room rates below Rs1,000 per night.
"Ahead of the peak holiday season, the revised GST rates for hotels will go a long way in strengthening the leisure, MICE and corporate-travel businesses and will further contribute to the growth of the tourism sector," Vishal Suri, managing director of SOTC Travel said of the move. "With the lowering of corporate-tax rates from 30 percent to 22 percent, we are now at par with (other) South Asian countries."
Vishal added: "The reforms undertaken by the government will help businesses with higher post-tax profits and hence incentivize investments into the country, reviving the current economic growth rate. We are hopeful to witness a rise in demand and bookings."
The India Convention Promotion Bureau has launched an effort to promote these potential savings for visiting organizations.
"When an international conference comes to India, the accommodation is booked by overseas agencies," Chander Mansharamani, vice-chairman of ICPB, told The Economic Times. "We have sent a circular to all our clients saying GST on hotel accommodation has [been] reduced to 18 percent. We are looking to work out something where we can convey this message further."
Some experts also believe that this step by the government should be backed by developing tourism infrastructure and lowering the tax burden in the mid-market segment in order to boost the hospitality sector.
Commenting on the new tax policy by the government, Neeraj Govil, senior vice president of South Asia for Marriott International said: "The recent tax cut move will impact the hospitality industry in a positive way. Sectors like MICE will especially benefit because the industry can now look at local options. This is a welcome move and will benefit the industry in the long run."
Stanley Ho is senior editor of M&C Asia