Budget 2025: Hospitality sector seeks infra status, rationalisation of tax rates

In the 2023-2024 Union Budget, Finance Minister Nirmala Sitharaman had announced plans to develop at least 50 destinations as a comprehensive tourism package. In the 2023-2024 Union Budget, Finance Minister Nirmala Sitharaman had announced plans to develop at least 50 destinations as a comprehensive tourism package.

Ahead of the upcoming Union Budget, K B Kachru, President of the Hotel Association of India, highlighted several key issues that need to be addressed to unlock the full potential of India’s hospitality sector. These include granting infrastructure status to the industry, rationalizing tax rates, easing visa processes, and offering more incentives from state governments to promote investments.

In an interview with PTI, Kachru remarked that India needs to market itself more effectively as a tourism destination. Drawing comparisons with countries like Japan, South Korea, and Thailand, he noted that these nations had successfully boosted their GDP by giving significant importance to the tourism sector.

“India has immense potential in tourism, but we need to focus on identifying and promoting destinations, particularly those with high MICE (Meetings, Incentives, Conferences, and Exhibitions) potential. We also need to improve infrastructure to attract global tourists,” Kachru stated.

According to Kachru, private sector investment is crucial for the growth of the industry. He noted that while government support is necessary, attracting private sector investments requires offering a respectable return on investment (ROI). "What would motivate investors to come to India is ensuring that the ROI is competitive enough to entice them," he added.

Kachru also pointed out that taxation remains a significant challenge for the hospitality sector. He stressed the need for a rationalization of tax rates and called for India to adopt best practices from countries such as Singapore, Sri Lanka, and Thailand, where the tax structures have supported the growth of tourism and hospitality industries.

On the topic of state government policies, Kachru urged governments to incentivize investments by simplifying procedures and providing attractive benefits. While significant progress has been made in reducing the number of licenses required to start a hotel, he stressed that more needs to be done to streamline the approval processes. "We need to make it easier for people to operate hotels. The goal should be to reduce approval processes to the minimum possible," he explained.

An important part of Kachru's vision for India's tourism sector is simplifying visa processes to enhance the ease of travel for international tourists. This would not only promote tourism but also support the growth of the hospitality industry.

Kachru also highlighted the importance of infrastructure development in tourism. He pointed to Thailand, where tourism contributes around 25% to the GDP, compared to India’s 6%. "If we grant infrastructure status to the hospitality sector, it will enable access to affordable loans, much like other industries. We’re not asking for more; we just need parity in support," he said.

The Hotel Association of India President also recommended that the government’s plans to develop 50 new tourism destinations should include incentives for building infrastructure such as hotels, entertainment centers, and convention halls. "If you are developing these 50 destinations, projects worth Rs 10 crore should also be considered part of the tourism industry," he said.

In the 2023-2024 Union Budget, Finance Minister Nirmala Sitharaman had announced plans to develop at least 50 destinations as a comprehensive tourism package. Kachru believes this initiative will help boost India’s tourism potential, but only if the sector is recognized with industry status by state governments.

State-level governments, Kachru argued, need to provide the same benefits enjoyed by other industries, such as favorable electricity tariffs, to the hospitality sector. This will help create a more conducive environment for investment and growth.

With these reforms, Kachru believes India’s hospitality sector can realize its potential and become a global tourism leader.