Boosting tourism may be high on the agenda of Prime Minister Narendra Modi’s government, but the higher tax regime has made India one of the costliest destinations in the world. A foreign tourist landing here ends up paying over 20 percent tax for various services, while India’s competing countries like Malaysia and Thailand score in terms of more tourists as taxes are in the range of 8 percent.

With taxes in China hovering around 4.9 percent, it got the fourth highest foreign tourist influx in the world (55.7 million), while India is at number 42 (6.97 million), according to 2013 figures. Thailand had 26.5 million foreign tourists and Malaysia at 25.7 million during the same period.

The first ever government commissioned comprehensive study on ‘taxes in tourism sector’ has laid bare the intricate system of taxes, making tourism one of the most taxed sectors in the country. A tourist has to pay over a dozen taxes which are incorporated in the services he use.

Sample this: A foreign tourist starts coughing up extra money the moment he lands at an Indian airport. He starts by paying airport levy (Rs 207 at Indira Gandhi International Airport in Delhi), followed by 4.94 percent service tax when a hires a taxi, luxury tax (5-33 percent across) and service tax (7.416 percent) on hotel rooms, service tax (4.94 percent) and VAT (12-20 percent) every time he consumes food or liquor or uses facilities like money changing or laundry. Taxes are factored when he ventures out of his hotel room to travel locally using trains or airlines: service tax is part of the airline (4.94 percent) and train ticket, and VAT is charged by state governments on airline fuel (5-30 percent). If he travels by road, toll tax and state entry charges become frequent companions.

A tourist then has to cough up entertainment tax every time he goes to watch a cultural program or visits an amusement park (12-35 percent). Tourists visiting ancient monuments are asked to pay a higher fee (Indians pay Rs 20 to visit the Taj Mahal, a foreigner pays Rs 750). Even for buying souvenirs, handicrafts or confectionary (6-12.36 percent), taxes again form part of bill.

The cumulative indirect tax to be paid by foreign tourists turned out to be above 20 percent. The study commissioned by then tourism minister Chiranjeevi in 2012 was submitted to the government two months ago. Early this week during a meeting on the new tourism policy, industry stakeholders from the hotel and the transport industry asked Tourism Minister Mahesh Sharma to give tax incentives for the sector and make them part of the new policy, so that the benefit be passed on to tourists. Sharma is learnt to have assured them that the policy would address some of the issues.

The study quoting the World Economic Forum report of 2013 had rated Indian tourism competitiveness at a low of 65 among 140 countries. In the competitiveness criteria specified, India ranked 21st in the criteria for tourism natural resources. However, India was ranked 67th in the ease of business environment and recorded a low rank of 110 in the criteria for regulatory framework for tourism and travel.

“Taxes levied on inbound tourism are among the highest in the country, and is one of the major reasons for India losing Foreign Tourists to competing South East Asian countries. The major competing tourist destinations like Malaysia, Singapore and Thailand have lower tax rates on services and products that are provided in the tourism sector,” the tourism ministry report said. Malaysia earned over $22 billion and Thailand over $45 billion, while India earned merely $18.3 billion in 2012-13, though India generated direct employment for nearly three crore people.

No doubt, India’s share in world tourist arrivals remains very low at 0.6 percent. India was ranked 38th in the world on the basis of international tourist arrivals. India got 70 lakh foreign tourists last year.

The study compared the taxes on other sectors like gems and jewellery, textiles, chemicals, pharmaceuticals, petro-chemicals, handicrafts and IT services and said they were taxed the least.

Predictably, the report suggested rationalisation of taxes and setting up tourism infrastructure zones to increase in number of budget accommodation.