India planning to cut taxes on travel and tourism in federal budget

Published on : Monday, January 8, 2018

indexNew Delhi is planning to slash taxes on travel and tourism in next month’s federal budget and bring in more incentives to the $210 billion sector, in order to boost economic growth and create more jobs.

This move is expected to add momentum to a domestic tourism boom in the world’s second most populous nation, where low inflation and rising incomes are bringing in change in lifestyles and consumption patterns of around 250 million middle-class Indians. Many destinations were introduced on airline routes last year, and thus, air travel is also growing.

India’s tourism sector grew over 10% in the last six months up till September, compared to near 8% in the year before. Tourism employs about 40 million people in India and could add 10 million jobs in a decade.

The Finance Minister Mr. Arun Jaitley favours lowering a 28% tax on hotel tariffs, and offering incentives to attract private investments.

If the move is implemented, companies expected to benefit include airlines like IndiGo, owned by InterGlobe Aviation, and Jet Airways and hotel operators such as Indian Hotels, that owns the Taj Mahal chain and EIH Ltd. that operates the Oberoi Hotels in India. Tour operators including Cox & Kings and Thomas Cook are also likely to gain.

Another government official said the budget was likely to “significantly” raise allocations for tourism infrastructure and raise income tax exemptions on investments in new hotels.

The government will offer incentives to more regional airlines this year to cover new, under-served airports. India needs about 200,000 new hotel rooms, Tourism Minister K.J. Alphons said in the parliament this week.

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

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