GST reforms to strengthen tourism sector; create new jobs, investment opportunities

The GST reforms are set to strengthen the domestic tourism ecosystem, making it more affordable for middle-class and budget travellers. The new tax structure also aims to promote cultural heritage and encourage investment in related sectors, according to a government statement on Monday.

These reforms align with the vision of sustainable and inclusive growth, fostering job creation and investment in hospitality, transport, and traditional crafts, while also accelerating the post-pandemic recovery of India’s tourism sector, it mentioned in a statement on the impact of GST reforms on the tourism sector.

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With the reduction of GST on hotels valued at less than Rs 7,500 per day, from 12 per cent to 5 per cent, stays will become more affordable for middle-class and budget travellers. This will also boost weekend travel, pilgrimage circuits, heritage tourism, and ecotourism.

The new tax structure is also expected to encourage investment in new mid-segment hotels, homestays, and guesthouses, creating jobs and improving infrastructure.

Another key benefit of the new tax system is the GST reduction on buses having a seating capacity of over 10 people. The new GST rate is now at 18 per cent, down from the earlier 28 per cent.

The government believes that the new tax rate will help bring down ticket fares, especially on semi-urban and rural routes. Further, it will encourage a shift from private vehicles to shared/public transport, reducing congestion and pollution.

It will also support fleet expansion and modernisation, improving comfort and safety standards in public transport.

The GST Council has also announced a reduction in art and cultural goods from 12 per cent to 5 per cent. This will apply to statues, statuettes, original engravings, prints, lithographs, ornamental articles, stone artware, and stone inlay work.

The move provides direct support to artisans, craftsmen, and sculptors, many of whom are part of India’s traditional cottage industries, the government said.

It is to be highlighted that, as per the government data, from 2021 to 2024, there has been a significant increase in the Foreign Tourist Arrivals from 15.27 lakh in 2021 to 99.52 lakh in 2024, indicating a robust recovery and growth in tourism post-pandemic.