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India's Hotels Seek GST Cut to Boost Tourism
27 Apr
Summary
- EY and FICCI urge GST reduction on hotel rooms above ₹7,500.
- High taxes are making India a costly destination for tourists.
- Sector needs strategic reset beyond tax reforms for growth.
EY India and FICCI have jointly recommended a reduction in the Goods and Services Tax (GST) on hotel rooms costing over ₹7,500. The proposal seeks to lower the tax rate from 18% to 9%, aiming to enhance India's appeal as an international tourism destination. This move is intended to counter the perception of India being an expensive place to visit.
The current tax structure imposes 18% GST on premium hotel stays, while rooms between ₹1,000 and ₹7,500 are taxed at 5%. This significant disparity is seen as a major deterrent for high-spending foreign tourists. The report emphasizes that high accommodation costs, largely due to taxation, make India less competitive compared to countries like Thailand and Vietnam.
Despite strong domestic travel and expanding hotel supply, India's inbound tourism figures remain modest. Foreign tourist arrivals were approximately 9.9 million in 2024. The report warns that with over 1 lakh hotel rooms in development, a lack of international demand could lead to supply-demand imbalances.
Furthermore, the report, titled "Reimagining Inbound Tourism in India," advocates for a comprehensive strategic overhaul. It points to fragmented tourism branding, limited international marketing, and cumbersome visa processes as significant barriers. The authors suggest shifting towards an experience-led tourism model.
Experience-driven segments like spiritual tourism, wellness, and culinary travel are gaining traction. Event-led tourism, including concerts and festivals, also shows significant growth potential. The report identifies shifting traveler demographics and digital platforms as key influences.
Globally, international visitor spending is projected for substantial growth. The report positions this as a critical opportunity for India. However, it stresses that urgent policy interventions, including improving price competitiveness through GST rationalization, are necessary to capitalize on this potential and avoid widening the gap between India's tourism capabilities and its actual performance.
