Tax changes planned to woo tourism investment

The Gujarat government, to woo investors to the tourism sector, is planning to rationalise the state's tax structure. It has also decided to revamp the Tourism Corporation of Gujarat Ltd (TCGL), the nodal agency for tourism in the state.

Gujarat chief minister Narendra Modi said, "To make tourism in Gujarat a happening thing and to enable it to meet international standards, I am planning to rationalise the existing tax structure. I would like to deal with this at length as I have not yet finalised the proposal for restructuring the tax structure. This will include sectors such as hotel, food and eateries, transport and traditional health care."

A few days back, in its suggestions to the state government about the development of the tourism industry, the Confederation of Indian Industry (CII) had suggested the rationalisation of the luxury tax structure in Gujarat to lure investors.

"The rationalisation of luxury tax is to be in tune with at least the neighbouring states. The tax rates can be brought down to five per cent which will result in a 30-40 per cent jump in tax revenue as occupancy rates will grow by more than 50 per cent," said Piruz Khambatta, chairman of CII's Gujarat council.

TCGL, which is facing a crunch situation owing to lack of fund allocation in the state Budget, may be getting additional funds during next two years.

Modi said, "There is a possibility that I may allote state funds for this to make the sector more vibrant and to make international destinations such as Dinosaur Fossil Park at Balasinor, Indus Valley Civilisation sites at Lothal and Dholavira, Mahatma Gandhi's birthplace at Porbandar and various national destinations more colourful. In addition, I am proposing to have special tourism zones on the lines of special economic zones," said Modi.

"Following advises from the chief minister, we are at present working on the state's luxury tax structure. Though it may not be possible to include the changes in the Tourism Policy-2003 which we are planning to unveil during September, we can later append the tax structure. We are seeking the industry's help and organisations such as the CII and FICCI to make the new tax structure more investor-friendly," said Kishore Rao D, a senior IAS officer and managing director of TCGL.

At present, tourists have to pay a 15 per cent luxury tax in Gujarat which is much higher than that in Madhya Pradesh, Maharashtra or Chhattisgarh.

Following CII suggestions, the state government is also considering less legal binding on new investments in the tourism sector.

"The state government should ensure an one-stop approval window for new tourism initiatives. In fact it would be a good idea to have a project with all approvals and offer it for development to private enterprises.

Land acquisition rules also need to be rationalised and necessary legal provisions and support should be made available for encouraging paying guest accommodation for tourists," the CII said.

"We already have a single-window system for all industries and new investments, and may consider setting up such systems for the tourism sector," said Modi.

On the TCGL, Modi said, "It is true that we have not yet reached greater heights in tourism. This year onwards we are globalising TCGL to give a boost to Gujarat. TCGL is being strengthened by various ways and in the coming months we will see the vibrancy of the corporation."

Modi also said that most of the interesting parts of Gujarat and Rajasthan are being covered by the Royal Orient Train, which is similar to the concept of the Palace-on-Wheels.

The present route of the train is not covering all important destinations in the states. This is taking a toll on the business from Royal Orient Train for TCGL.

"I have asked my officers to explore the possibility of going in for a broad-gauge Royal Orient Train with a strong marketing network. Out of the revenue generated from this train, 72 per cent goes to Indian Railways while we get only 28 per cent and so we need more travellers for this train."

This year, TCGL with the help of the Indian Railways, got Agra, Jaipur and Udaipur included in the itinerary of the Royal Orient Train and the TCGL is considering the possibility of introducing health spa on board for tourists.