Now, pay more for weekend getaways and dining out

A re you a foodie? Or love travelling?

Well, here’s some bad news for you.

Eating out  and hotel stays have now become more expensive  with taxes now accounting for over 30 percent of the bill you settle at restaurants because of the hike in service tax from 10% to 12%. A five star hotel stay will cost Rs 300 more on existing tariff of about Rs 15,000 per night. The hotel industry has a luxury tax, which depending on the various states, ranges from 5 to 12.5 percent. Taxes  on food bills would account between 30 to 36 percent o after the proposed hike.

Sectors like hospitality and auto ancillary will be negatively impacted by proposals announced in the Budget 2012-13 but it has brought good news for healthcare firms, tractor makers and housing finance firms, according to rating agency ICRA.

“The increase in service tax rates is expected to make hotel stays and dining out dearer for guests, thereby impacting demand to an extent,” according to ICRA. Apart from taking the service tax to 12 percent, the government has also hiked central excise duty on manufactured goods from 10 percent to 12 percent.

“We expect tour prices to increase due to the cascading effect of the service tax increase resulting in an adverse impact on the travel and tourism industry as a whole,” Thomas Cook India Managing Director Madhavan Menon said.

He said the inbound segment, already reeling under the impact of global slowdown in key source markets, would be further impacted with a decline in foreign tourist arrivals.

The Indian Association of Tour Operators (IATO), which has been asking the government to do away with the 10 percent service tax charged earlier, was taken aback by the decision. “We are shocked to see that more areas have been included for service tax which has bearing on tourism,” IATO President Subhash Goyal said.

He said the increase in tax burden will make India uncompetitive as compared to countries like Thailand, China and Malaysia. It may be noted that in the Economic Survey 2011-12, the government had suggested various measures to promote India as an attractive tourist destination.

Agencies