India raised service tax on air travel by 50 rupees for domestic travel and 250 rupees for international travel by economy class. Service tax also widened to cover hotel accommodation above Rs 1,000 per day, and A/C restaurants serving liquor. A survey by Thomas Cook (India) Pvt Ltd. yesterday already revealed fears of higher taxes in the airfare and accommodation sectors – the confirmation from the Indian government came sooner than predicted, and unfortunately for service providers, air travel was already subject of higher taxes because of higher tax on Air Turbine Fuel:
“The tourism industry is shocked to see such new doses of taxation put on tourism sector in this year’s budget,” said Indian Association of Tour Operators president Vijay Thakur in a press statement. “This is indeed a great setback for the industry which is just recovery gradually from the economic downturn and aftermath of various negative events like terror attacks, swine flu and natural calamities.”
Air travel and hospitality were not the only increases in the 2011 Indian Union Budget update. Budget estimates for 2011-12 projects Rs 9,32,440 crore – an increase of 24 per cent. Expenditure in 2011-12 is estimated at Rs 12,57,729 crore, an increase of 13.4%. Food inflation is down from 20.2% last year to 9.3% in January 2011 but it is still a matter of concern.