28 percent GST detrimental to survival of amusement park industry

With the imposition of a 28 percent tax rate on amusement-theme parks under the forthcoming Goods and Services Tax (GST) regime, there exists an underlying threat to its survival, as it not only hampers the industry but will also pose to be a deterrent to new entrants in this industry.

One year ago, in many states, where the tax rate was negligible, service tax added to 15 percent. With the GST at 28 percent, a huge burden falls on the industry?s capacity to thrive.

The new taxation regime puts this industry catering to outdoor entertainment for children, youth and families at par with the casinos, betting and race courses. It also overlooks the essential role played by the industry in creating social infrastructure and attracting tourism.

The amusement park industry, which is still in its budding phase in the country, is a highly capital-intensive industry and requires significant investment both Capex on land and rides to the tune of Rs. 700 crores for mega parks and Rs. 100 crores for mid-sized parks and also the Operational Expenditure (Opex).

Furthermore, although being a highly seasonal business, all the parks have to operate on full capacity even during off seasons.

In spite of operating on such thin margins with an estimated cumulative revenue of Rs.1,700 crore, the amusement park industry has contributed significantly towards the creation of social infrastructure and currently employs around 1.25 lakhs across India.

Realising the role it plays in establishing tourist hubs, more and more states are now keen to host theme parks to attract increasing number of tourists.

?Amusement park is not and was never a luxury. It is a social infrastructure giving outdoor entertainment to children and youth of tomorrow?s India, who are otherwise glued to gadgets and digital world. Amusement Parks helps foster bonding with family and friends, relieves stress and provides rush of adrenaline and more. It has a direct correlation with the development of tourism in any state and plays a major role in creating employment both directly and through ancillary and other related industries,? said Shirish Deshpande, President, Indian Association of Amusement Parks and Industries (IAAPI) and CEO, Pan India Paryatan Pvt. Ltd. (PIPPL)

?In view of this, as a representative of the industry, we would like to urge the government to consider our standpoint and treat the industry in line with hospitality and restaurants which fall in the GST slab of 12 to 18 percent, on top of it this industry does not consume major raw materials and input credit is not more than two to three percent therefore it makes amusement industry unviable to sustain such high GST rate,? added Deshpande.

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 percent. The GST rate in Australia is 10 percent, Singapore is seven percent and Japan five percent. This, on one hand, stimulates tourism demand, and on the other, creates an economic multiplier effect on a country?s GDP, thereby creating business opportunities across multiple sectors such as hospitality, food and beverage and transport, among others.

?Imposing such high rates of taxation is detrimental to the prospects of our business making it unviable besides putting thousands of jobs at stake. The amusement park industry is still at its nascent stage and requires significant support from the government?s end to make the industry flourish in its full dynamism. We strongly advocate the government to rethink on its decision and support our industry by bringing it under the aegis of the tourism industry,? asserted Rajeev Jalnapurkar, CEO, Ramoji Filmcity.

(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)