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Infrastructural Policies are Favorable for Tourism Industry

Infrastructural Policies are Favorable for Tourism Industry
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The travel and tourism industry has become one of the largest and fastest growing economic sectors globally and is one of India’s biggest revenue generating sectors. The sector has witnessed an exponential rise over a period of past few years and the direct contribution of Travel & Tourism to GDP is expected to grow by 7.9% p.a. to INR 6,115.5 bn (2.4% of GDP) by 2026. By 2026, Travel & Tourism will account for 29,629,000 jobs directly, an increase of 2.0% pa over the next ten years.  However, the key factors which are concerning the tourism industry in India are infrastructure and lack of easy and efficient tax structure.

2017 Union budget was a progressing one for travel Industry with due importance given to technology and Infrastructure development. Fin Min’s increased focus on infrastructure development in the coming fiscal years will bring in efficiency in the operations of railways, airports, roads and highways in the country.  The launch of the second Incredible India campaign across the world will be tremendously beneficial for the Indian travel and tourism industry.  A further focus on digital payments and good governance by the government is a welcome step and is expected to provide a much required thrust to the technology based online travel companies.

The reduction in corporate tax for start-ups from 30% to 25% is a huge benefit and corroborates the “Startup India” initiative announced earlier by the government to boost ease of business in India. The increased period for profit linked deduction for three years out of 7 years as against five years is very useful and is also a welcome initiative for the start-ups.

We were expecting some respite on the service tax issue but it was completely overlooked by the central government. Prior to this change, we had 70% abatement which is reduced to 40% and earlier it was 30% taxable value and now it is 60%. This means that earlier it was taxed 4.5% on package and now it is 9%.  This would negatively impact price competitiveness in the industry.

 
Edition: April 2017

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