- Indian Association of Amusement Parks and Industries (IAAPI) condemns high taxation rate of 28% putting the industry at peril
- Overlooks the role played by the industry in creating social infrastructure and attracting tourism
Mumbai, June 1, 2017: The recently announced Goods and Services (GST) tax by the Government of India, has put the very existence of India’s amusement – theme park industry at peril with the imposition of a mammoth tax rate of 28%. This move by the government makes the parks economically unviable which might eventually lead to them being shut down. The new taxation announced also equates the industry with casinos, betting and race courses and completely overlooks the essential role played by the industry in creating social infrastructure and attracting tourism.
This kind of tax rate places significant burden on the industry which was already reeling under the pressure of entertainment tax coupled with a service tax of 15%. Furthermore categorizing the industry in the luxury tax bracket also seems unfair as amusement parks caters to family audience that may be upwardly mobile, but far away from the income levels that can pay luxury taxes.
The industry is still in its nascent stage in India and is characterized with huge investments and longer payback period. In case of mega parks investments to the tune of Rs. 700 crores are put in land and rides whereas the same for mid-sized parks tends to be to the tune of Rs. 100 crores. On top of it, the industry also requires significant Operational Expenditure (Opex) and though being a highly seasonal business are operated on a full capacity even during off seasons. The industry does not consume major raw materials and input credit is not more than 2-3% therefore it makes amusement industry unviable to sustain such high GST rate.
In spite of operating on such thin margins with cumulative revenue of INR 1,700 crore approximately, the amusement park industry contributes significantly in social infrastructure creation in the local economies and also plays an important role in the development of ancillary industries such as food & beverage and retail among others. Collectively across India, amusement parks employ around 1.25 lakhs manpower. To boost local economy, more states are now keen to host theme parks to attract tourists.
Mr. Ashok Goel, Promoter, Pan India Paryatan Pvt. Ltd., (PIPPL) said, “Such high taxation rates puts a very big question mark on the sustenance of our industry which is already under substantial stress owing to the existing high tax rates and low margins. Moreover, categorizing us alongside casinos, betting and race course in really unfortunate for an audience which caters to family entertainment and recreation. It is a social infrastructure, which provides outdoor entertainment to children and youth, who are otherwise glued to gadgets and the digital world. Amusement parks help encourage bonding with your near and dear ones and in most cases act as a stress-buster. Collectively, as a single voice of the industry we would like to urge the government to treat our industry at par with hospitality and restaurants which fall in the GST slab of 12%-18%.”
Globally, in markets where ever GST has been introduced, tourism rate has been kept half of the GST rate and in most cases, it is under 10%. The GST rate in Australia is 10%, Singapore is 7%, Japan 5%, Malaysia 6%. This on one hand stimulates tourism demand and on the other creates an economic multiplier effect on GDP thereby creating business opportunities across multiple sectors such as hospitality, food & beverage, transport among others.
Mr. Ajay Sarin, Chairman, Hindustan Amusement Machines said, “Such high rate of taxation is not only detrimental to the growth of our business by making it unviable. We would like to request our government to rethink on its decision and support our industry by bringing it under the aegis of the tourism industry. This will not only ensure the industry flourish in its full potential but also help attract significant investment which will further foster tourism in the country.”
Such a high tax rate will not only hamper the current Amusement Park industry but will be deterrent to new entrants in this industry.