Category Archives: Agents

Against the backdrop of a high growth potential in Indian Travel & Tourism market, an organized tax structure is vital, claims Anil Parashar, President and CEO, InterGlobe Technology Quotient. He adds, “The implementation of the unified tax structure is a huge step towards preparing the nation that is expected to grow at $160.2 billion by 2026. Although, the industry presently has mixed reactions towards the introduction, going forward, this step would attract more industry growth as the GST has been planned according to the tax player’s capability. For example, GST Council reduced service tax on economy class from 6 to 5 per cent while increasing business class to 12 per cent from the current 9 per cent.”

P. K. Anish Kumar, President, ATTOI, was quite disappointed with the GST announcement. “Most of the foreign travellers have concerns regarding safety, security, cleanliness in India and thus choose 4 or 5 star hotels to stay in. This does not mean they are rich but prefer safe, quality accommodation. Now with 28 per cent tax on hotels and 5 per cent GST to be paid by agents kills the industry as the effective tax to be paid will be 33 per cent. How will we compete with destinations like Hong Kong ,which has no tax on hospitality industry? Earlier tax in Kerala was 19 per cent even on 4 and 5 star hotels and now competitiveness of the industry is thrown off with direct 28 per cent. A houseboat in Kerala costs above Rs. 6000 and the tax will deter the USP of the destination. India will not be seen as a long haul destination any more as packages will become shorter due to the expenses to be incurred by the foreign tourists. Tourism has to be seen as an employment and revenue generator and government’s approach to penalise tourists and earn money from them will ruin the tourism industry overall,” he claimed.

Rajan Sehgal, Chairman–Northern Region, TAAI, claimed that there is not much difference in air travel apart from the taxes on economy and business class being separate. However, he said, “Since the hotels will be subjected to 28 per cent tax for over Rs 5000 room rate, this will be a huge blow to the industry. We were expecting about 18 per cent, which has been applied, but for hotels in the Rs 2500-5000 range. Our aim is to get more foreign tourists to India, and not just domestic tourists, and by hiking up the main part of travel will not benefit the industry in any way. Our price needs to be competitive in comparison to the European market or other markets in Asia where the rates for such services are much lower.”

Debjit Dutta, Chairman, IATO East Chapter, said that the announced tax slab on tour operators is satisfactory but because hotels are a major component of their business, the 28 per cent tax on hotels above Rs. 5000 will hit them in a bad way. “Most inbound tourists want to stay in properties that are well above the Rs. 5000 bracket. The business model for inbound is also different from that for domestic – we create our deals and packages about a year in advance and with the new tax rate for hotels, we will have to pay the 28 per cent and five per cent, in addition to the standard rate of the hotel room. This barely leaves us with any profit margin. The tax rate needs to be reconsidered since it will kill a lot of business where most of the hotels will benefit from direct booking. In addition, with neighbouring countries coming up in a big way such as Sri Lanka, the products and tax rates need to be competitive,” he added.

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.”

Chander Mansharamani, Vice Chairman, ICPB, shared that the GST slabs announced for hospitality industry will negatively affect inbound tourism immediately, deterring tourism especially when the country is in competition with neighbouring countries. “The MICE industry will be terribly hit as most of the convention facilities are only available in 5-star hotels which have room rates of Rs. 5000 or above. The high tax rate of 28 per cent will negatively impact conventions and conferences in the pipeline as well. I feel scope for manipulation has been left for the hotels where one can charge Rs. 4990 for a room and pay only 18 per cent instead of 28 per cent. Also there is confusion whether the tax will be charged on rack rate, published rate or on the negotiated rate. The whole purpose of one tax one India is defeated,” he added.

According to the GST Council, there will be 5 per cent GST on tours, said P.P. Khanna, President, ADTOI. However, he added that it is not clear whether this rate is applicable on value addition or gross amount. “In a way, the 5 per cent rate is good as we were already paying 4.5 per cent tax on the packages, and it is only 0.5 per cent more than that, which is tolerable. The service tax amendment of 9 per cent tax was more cumbersome for us, as applying for CENVAT credit was an issue, especially with small tour operators and small hotels not being systematic in generating proper invoices in our country. I think the government has taken special consideration for tour operators, as this process was difficult for us,” he shared.

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 28 per cent tax on hotels is going to affect not only the hotel industry, but other businesses as well, said Sarab Jit Singh, Vice-Chairman, FAITH. He added, “It is a clear way to kill the travel and hospitality industry. Secondly, GST of 5 per cent on tour operators, which was already there. However, the government should look at if they want to promote tourism or their purpose is to earn tax money from tourism instead of generating employment and earn foreign exchange from this sector. They should decide if they want the tourism industry to perish or flourish. We are tired of knee-jerk reactions that we get from the government now and then. I think the government needs to rethink the decisions on taxes. We are having a meeting with FAITH and work on a consolidated approach to talk to the government on this.”

The Government of India’s GST Council finalised the tax rates on services under the Goods and Services Tax (GST) regime at their meeting held in Srinagar, Jammu & Kashmir. The GST regime is scheduled to kick-in from July 1, and the council has approved the GST rates for services at Nil, 5%, 12%, 18% and 28%. According to the current rate, the 5% rate of GST will be levied on transport of passengers by rail (other than sleeper class); transport of passengers by air in economy class; transport of passengers with or without accompanied  belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport;  as well as supply of tour operators’ services. There is 12 per cent GST rate levied on transport of passengers by air in other than economy class. These rates will be further subjected to vetting and would undergo some changes.