Impact of GST on Travel and Tourism Sector
As India is having a rich cultural and historical heritage, its tourism and hospitality industry has become one of the key drivers of growth among the other sectors of the economy. A huge employment, incomes and foreign exchange are being provided by travel and tourism sector. Foreign exchange helps economy to boost. Large tax revenue is being generated by this sector. Indian tourism industry is expected to reap great benefits under the new GST regime. There are uniform tax rates, which results in the final cost for end-user perceived to decrease and in turn it would attract more foreign tourists.
This meant more revenue for the government and assist in the growth of the industry. Travel and tourism industry includes air travel, car rental, water travel, coach services, railway, hotels, shared accommodation, camping cruises, restaurants, catering, bars and cafes, tourist guides and other connected industries like financial services, travel agents, tour operators, online travel services and tourism organizations. Following are the GST rates provided by the government of India :-
GST rates on Travels
|· Railways in Air Conditioned or first class coaches
· Air travel in economy class
· Transport of passengers by an air conditioned contract or stage carriage (i.e., buses) and radio taxis.
|· Air travel in other than economy class||12%|
|· For renting of motorcabs wherein the fuel cost is borne by the service recipient||18%|
GST rates on Hotels
|Actual bill amount:
· Upto Rs. 999/-
|· From Rs. 1000/- upto Rs. 2499/-||12%|
|· From Rs. 2500/- upto Rs. 7499/- :||18%|
|· From Rs. 7499/- and above||28%|
Rate of GST on Food and Beverages in Hotels and Restaurant.
|· All stand-alone restaurants irrespective of air conditioned or otherwise, also food parcels or takeaways.||5%|
|· Restaurants in hotel premises having room bill of less than Rs 7500 per unit per day.||5%|
|· Restaurants in hotel premises having room bill of Rs 7500 and above per unit per day (even for a single room)||18%|
GST Rates On Travel Agents
|· Tour Operator||5%|
|· Commission Earned
· Pure agent model
Ease of Taxation Procedures
As in previous tax regime there were multiple taxes. The state had different taxes and the central had different, which make the taxation procedure complex for tourism and hospitality sector. Also there was no option of availing the option of input tax credit (ITC). Under GST, the multiple taxes from the previous tax regime are eliminated and the single tax regime are followed. This will help to promote this sector also there are flexible criteria to avail the input tax credit (ITC).
Reduced Burden on Consumers
As earlier the different-different taxes were charged on single bill, which put burdens on the pocket of the consumer. But in GST, the scenario is completely different. Now, only GST is being charged on the services of tourism and hospitality at a lower rates which saves the substantial amount as compared to the previous tax regime.
Also there are transparency as before most average consumers cannot distinguish between the multiple taxes and its rates. Under the GST regime, there are more comprehensible and transparent tax structure as single charge on there bill.
Input Tax Credit (ITC)
In the previous tax regime, there was no option of availing the Input Tax Credit (ITC). But under GST, there is ease of availing ITC. It enhances the scope of ITC and will result in the substantial savings of tax credit in respect of capital investments and inputs which was not there in earlier regime.
Liquor Not Included
Liquor should have been included in GST to ensure the seamless credit for the tourism industry. Exclusion of liquor from GST regime defeats the very purpose of bringing a uniform tax structure across the nation.
While the sector remains divided on the impacts of GST in this sector, most of the players in the industry have welcomed the new tax regime with great enthusiasm and transparency. The long term impact of GST is projected to be positive and it will definitely add to the accelerating growth in this sector.
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The author of above article is Sameer Batra, BBA Professional.
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