Impact of service tax on hotel industry: An empirical study using listed companies of hotel and restaurant industry

Abstract

In recent budget, finance minister of India has announced 0.5 per
cent hike in service tax. This increase of service tax from 14 percent
to 14.5 percent resulted into real worry for service industries growth
in India. Infect, in last four-year service tax increase from 10.3 percent
to 14.5 percent that cause slowdown in different service related
industries. In present study, researcher tries to identify whether
there was impact of this service tax on growth of hotel and restaurant
industry do exist or not using regression analysis. Using last five years
growth data of 41 companies and service tax, the result of regression
indicating clear cut negative relation between growth in hotel and
restaurant industry and service tax. In fact, this significant relation
talks lot about next year possibility of further slowdown in growth of
hotel and restaurant industry due to further hike in service tax in this
budget. However, result showing that only21.8 percent variance of
growth of hotel and restaurant industry was represented by the
service tax, market capitalization of company and growth equity
valuation. Hence, there is scope of identifying more variables that
impacts on growth in hotel industry. The researcher's objective is to
explain negative impact of service tax on growth of service related
industry. Specifically, in this research paper focus was on growth of
hotel and restaurant industry. This result can be helpful to the
different stake holder of companies falls in service industry category,
for taking decision in better way. It also helps to government for
understand negative impact of service tax on growth of service
industry that in way hurting economy as whole.