28% GST detrimental to the existence of amusement park industry

Industry being categorized alongside casinos, betting and race course
Mumbai, May 30, 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 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.

One year back, in many states, where the tax rate was 0%, then service tax added to 15% and now with GST it is 28% which is a huge burden on the industry.

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 a full capacity even during off seasons.

In spite of operating on such thin margins with cumulative revenue of INR 1,700 crore approximately, the amusement park industry has contributed significantly towards social infrastructure creation and currently employs around 1.25 lakhs across India. Realizing the essentiality, it plays in establishing tourist hubs, more and more states are now keen to host theme parks to attract increasing number of tourists.

Mr. Shirish Deshpande, President, Indian Association of Amusement Parks and Industries (IAAPI) & CEO, Pan India Paryatan Pvt. Ltd., (PIPPL) said, “This is a huge setback for our industry which in essence puts our very survival at risk. Such high taxation is out rightly unsustainable for our industry which as it is operates on a paper-thin margin. 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. 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%-18%, on top of it this 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.”

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. Rajeev Jalnapurkar, CEO, Ramoji Filmcity said, “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.”

Such a high tax rate will not only hamper the current Amusement Park industry but will be deterrent to new entrants in this industry.