Tourism & Hospitality sector sceptical about implications of GST Bill


The 122nd Constitution Amendment Bill, 2014 commonly termed as Goods and Services Tax (GST) Bill was passed with unprecedented unanimous approval in the Rajya Sabha – the Upper House of the Indian Parliament on August 3, 2016.

Recently the Federation of Associations of Indian Tourism & Hospitality (FAITH), the umbrella association of all the national associations in the travel, tourism and hospitality sector in the country, called on Bhupinder Yadav, Chairman, Rajya Sabha Standing Committee on GST and highlighted that under the draft GST Bill, the definition of Export of Services does not includes the tourism and hospitality sector. As a result, whatever benefits will be conferred on the export players after the finalisation of the bill will not reach the tourism and hospitality sector until the definition is updated. Very soon FAITH along with industry representatives will be meeting the concerned officials again to submit specific solutions.

Presidents from the other travel trade associations feel it is too early to talk about the bill as it is still in the draft stage. However, they are now eager to put on their thinking hats and understand the GST Bill and its consequences on the tourism sector. Speaking in unison, they agree that to spread the right understanding about the bill among their members and address the challenges to the government officials, if any.

As is being said, this will pave the way for a unified common tax regime in India thereby eliminating state boundaries and making India “One Country One Tax” soon. With the implementation of GST, not only the GDP is expected to grow by 1.5-2%, India will also be seen as an economy where the ease of doing business factor will improve by leaps and bounds.

GST Bill will be placed in the Parliament for approval. Likewise, 50% of the states have to pass the Constitution Amendment Bill post which it will be implemented from April 1, 2017, making this the most significant tax reform since the country’s independence and the next big step forward since the 1991 liberalisation, catapulting India into the league of big players in the world economy.

Frontrunners in the sector highlight the implications of the GST Bill on the tourism and hospitality sector:

Sunil Kumar, President, TAAI
GST Bill has been passed in the Rajya Sabha but we need to figure out on how it will connect the service tax to GST. Now the onus lies on us to understand the bill and what effect it will have on the travel and tourism industry. Simultaneously, we are keen to spread awareness on this new policy among our members.

Praveen Chugh, President, TAFI
We hope that GST will do away with the multiple taxes that are levied on travel agents. This time, unlike the time of service tax introduction, we hope there will be clarity in understanding the bill, reasonable tax rate and the tourism sector will be conferred on the export status.

The service tax got operational way back in 1997 and we are still struggling with consultants in understanding the abetment procedure which is why there are a number of cases still pending. We don’t want the same story to be repeated.

Collectively under FAITH, we have highlighted the above concerns and will be approaching the government soon with specific solutions. As a leading trade association, our major action would be to understand the bill once it is finalised. We also hope that the government empathises with the much talked about travel and tourism sector.

Pronab Sarkar, President, IATO
Passing of the GST Bill in Rajya Sabha is a forthcoming step by the Government of India. We believe that with the introduction of the bill next year, the multiplicity of taxes would be reduced. As of now the law is being amended and is too early to talk about what effect it will have on the inbound tour operators. All I can say is that IATO will go through the same once it is finalised.

Jyoti Kapur, President, ADTOI
There is optimism in the tourism sector with the passing of the GST Bill in the Rajya Sabha. We believe it will streamline the tax regime for good. We hope things to get better in our domain as multiple taxes will be a thing of the past. Now on, collectively as the premier association of domestic tour operators we will try to understand and analyse its repercussions on our segment and will make appropriate representation if needed.

Sharat Dhall, President,
The passing of the GST bill is a great step forward and establishes a uniform tax structure which will allow the free flow of goods across the country and should have a positive economic impact. However, the government will need to make an exception for the airline sector as the current service tax ranges from 5.6% to 9% of the base fare, which is considerably less than the GST rate that is being spoken about, of 15-18%.

Rajeev Wadhwa, Group CEO & Chairman, Baron Aviation
We need to see the impact of GST on services and trading businesses. Charter trading is one such sector that is likely to be impacted by the GST Bill, and not in a good way. BAOA needs to find ways to represent the industry and highlight its concerns to get some relief otherwise we will have negative impact of this policy. We also need to check the impact on ground handling, airport charges and MRO to take holistic view of our industry.

Vijay Kumar, COO, Express Industry Council of India
The Express Industry Council of India congratulates the government and opposition on the political maturity shown in unanimously passing the GST Amendment Bill in the Rajya Sabha. This would really help Indian economy in general and the logistics industry in particular to shake off the inefficiencies and lower transaction cost.

Aviation Turbine Fuel is currently treated separately from other petroleum products for claiming mod vat credits and if ATF is not brought under the GST regime there would be substantial cost impact on ATF used in our member aircraft due to cascading duties leading to price increases. We are also hopeful that in order to lower compliance cost, network industries like express industry, banks, etc. will only need to do single centralised registration under the GST regime as is the case with service tax registration presently.

Ajay K Bakaya, Executive Director, Sarovar Hotels & Resorts
The much anticipated passage of the GST Bill brings in a new era in fiscal reforms in India. Tax rates across various states will be uniform. The consumer will benefit from lower taxation, as there will be no tax on tax at different levels. Input credit on GST ushers in a whole new world of taxation.

Ritesh Agarwal, Founder, OYO
It is very encouraging to note that the GST Bill is finally on its way to becoming a reality after years of wait and discussions. It was one of the biggest pillars of reforms which will take up India’s ranking in ease of doing business by several notches. We look forward to working closely with the government in working out the rules which will provide greater clarity with regard to the applicability of this law for e-commerce players and aggregators.

Mahesh Iyer, COO, Thomas Cook (India)
We are delighted that the GST Bill has been passed by the Rajya Sabha which is a truly crucial development towards a unified tax regime, vital in addressing the ambiguities of the current indirect tax landscape, and hence beneficial to the economy as a whole. India is beyond doubt a key emerging market and this move will strengthen the confidence among international investors and their belief in the India growth story.

From the perspective of India’s travel services sector, currently saddled with multiple taxes, levied by both the Centre and the states, optimisation of taxes and ease of doing business has been the key ask of our industry and hence the GST Bill passage even more welcome! It is still a wait and watch on how the abatement/ presumptive tax based provisions available currently to the tour operators, money changers and air travel agents are transitioned in the GST regime.

Under the GST regime, it is expected that supplies of hotels and restaurants, a major cost component of tour services, will be subjected to a single tax, resulting in reduction in the cascading effect of taxes and hence increased cost efficiency to benefit travellers. However, for this benefit to play out effectively, it is necessary that all the B2B supplies are made fully creditable and the credit flow is seamless across the states. This aspect will probably require some deliberations.

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One Reply to “Tourism & Hospitality sector sceptical about implications of GST Bill”

  1. valerian dsouza says:

    Dear All
    Hope this GST will benefit for each n every citizen of India n need good flexibility rating for daily consumption items to relieve life of common man
    We need to develop national not only increase in taxation policy but reducing the cost cutting expenditures of government MPS

    water electricity LPG n public sector expenditures need special intention in rural areas

    All the best GST amendment n hope everyone benefit its n not burden on individual citizens
    valerian Dsouza

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