Tag Archives: CENVAT

Claiming that applying of CENVAT credit with 9 per cent service tax was cumbersome, Pronab Sarkar, President, IATO, said, “ GST was awaited for a long time and we were demanding from the government that since there is a lot of multiplicity of taxes in the tourism sector, the taxes should be rationalised and reduced. Thus, we were hoping to be put under the lowest GST slab and get some relief. I am glad that the government has agreed to both of them and has given us the same status what we wanted with 5 per cent GST rate. Also, there is no CENVAT credit on that. We are only concerned about one aspect of hotels, as they have put 28 per cent GST on hotels over Rs. 5000 which should not be more than 18 per cent. However, the hotel industry should come out and take up this issue. The government should encourage more tourists to come and not only look for more taxes. Rather, it should look for more tourists and get a bigger chunk of foreign exchange, which will not only generate revenue but also a lot of employment opportunities in the hospitality industry.”

According to Guldeep Singh Sahni, President, OTOAI, the government went two steps back and now they have come one step ahead with the current GST rate. He revealed, “We were giving 4.5 per cent tax before January 22, 2017 and then we had CENVAT available. After January 22, we were under 9 per cent service tax. This step disturbed our summer bookings and there was a major loss of business to international OTAs. The new rates which will be implemented after the GST council’s meeting is 5% on supply of tour operators’ services. We need to clarify the meaning of this. If it is on the profit or add-on, then it’s very good. But if it is on the total amount, then we again stand expensive by 5 per cent than our international suppliers, because if we are taxing international hotels, then we are taxing them again. As input credit is not available it has direct impact on us.”

The Outbound Tour Operators Association of lndia (OTOAl) has written to Union Finance Minister Arun Jaitley regarding the recent amendment in Service Tax, which would impact outbound tour markets. Explaining how the agents will not be given any input credit on the tax they pay, OTOAI has said that this would hamper the growth of the tourism industry. OTOAI has urged the finance minister to consider that the abatement available to tour operator should be amended to provide a choice to the tour operator to opt for a lower abatement along with CENVAT credit on input services or opt for a higher abatement without claiming the CENVAT credit on input services. The letter undersigned by OTOAI President Guldeep Singh Sahni reads, “As the actual margin earned by the tour operators is only 3 to 5 per cent, the increase in taxable value to 60 per cent will significantly negatively impact the sector and increase the cost of outbound tours.”

CA Manish Gadia, Partner, GMJ & Co, says, “The Service Tax has indeed gone up from 1.5 per cent to nine per cent on the total tour package now, which is a huge jump. While the tour operators will now have to pay a higher tax, they will also stand to benefit from this as they can now take set-offs in the form of CENVAT credit. According to this, service providers are allowed a set-off of the taxes paid on the services that are incurred while providing the same.”