India’s top hotels are losing out on major international events and conferences to Dubai and other cities in the UAE owing to tax-related costs that are making it a costly location for organisers.
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Tax now adds around 35 percent to the cost of hosting events in India, leading to organisers to look elsewhere in the wider region, to the UAE and to Thailand, where added costs are not an issue.
Post implementation of GST (goods and services tax), hotel room tariffs now start from Rs 7,500 per day ($104) and attract the highest tax rate of 28 percent – significantly pushing up the final tariff for customers in 5-star hotels and many 4-star and boutique hotels-cum-convention centres in India’s metro cities.
On top of the 28 percent GST, a 5 percent GST by Indian tour operators and GST charges on other services related to such events and conferences, lead to higher costs for global organisations and international event managers hosting events in India.
“India has recently lost a big international event – a major medical conference involving 6,000 foreign delegates to one of Gulf countries because of the high cost of holding the event here,” Chander Mansharamani, vice chairman of India Convention Promotion Bureau (ICPB), told Arabian Business.
“This is just one of the instances and like this our high end hotels and convention centres have been losing out on getting international business every day ever since the high GST rate was imposed.”
According to hospitality industry sources in India, hotels and convention centres in Gulf countries and Thailand are also favoured because of the comparatively favourable costs offered to global conferences and events.
While there is no figure to available to show the level of business lost since the GST came into effect, Mansharamani said the loss is significant.
“It is a classic case of India’s loss is our neighbours’ gain. Internationally, the tax rates applicable on hotel tariffs are 6 percent or less. So, why would any organiser want to pay such exorbitant costs in India to hold their events here,” Jaison Chacko, assistant secretary general, Federation of Hotel & Restaurant Associations of India (FHRAI), told Arabian Business.
The tariff for an event at an Indian 5-star hotel, including a 4-day stay costs around Rs 1 lakh ($1380) per delegate. At 28 percent GST amount adds a further Rs 28,000 ($388) to the cost.
“A Delhi-Dubai-Delhi air ticket will come for about Rs 18,000 ($250) these days. So, even if the organisers have to bear some additional costs, besides the hotel tariff, still the air ticket will come free for them if they hold the event in a Dubai hotel,” Pronab Sarkar, president of Indian Association of Tour Operators (IATO), told Arabian Business.
The hospitality industry associations have taken up the issue of rationalising the GST rates on hotel tariff with the Indian finance ministry officials, but so far there has been no relief offered.
Jaison said FHRAI plans to take up this issue with the Finance ministry team when they hold their pre-Budget meeting next month.
“Our demand is to bring down the GST to about 14 percent or so,” he said.
IATO and ICPB officials said their associations have also pleaded with the Indian finance ministry to bring down the GST on high end hotel tariffs and on tour operators.
“International conferences and events help India to earn the much needed foreign currency. We should not kill this business with exorbitant tax rates,’ Sarkar said.
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