Domestic tourism has been thriving in India over the years, for reasons ranging from higher disposable income in the hands of people to a changing lifestyle where travel enthusiasts are keen to explore various hotspots in the country. Foreign tourist arrivals (FTAs) have also been steadily growing in India, though the growth in money spent by them has not grown commensurately.
A few days ago, the government dealt a body blow to tour operators by changing the norms for levying service tax on them. The guidelines have confounded the industry instead of sorting out things, according to an expert.
"In a significant development, the government has changed the service tax applicable on tour operators. With effect from January 22, 2017, tour operators would be required to pay service tax on 60 percent of the total invoice value. Whereas, currently the tour operators pay service tax in two slabs – only for booking hotel accommodation the tax is payable on 10 percent value and for other tours the tax is payable on 30 percent," Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP, said in a note.
"In the recent past, the tour and travel industry has been plagued with intense inquiries and investigations from service tax authorities with respect to services related to booking hotel accommodation. The recent amendment, instead of clarifying the issue, creates more doubts for the industry, specially related to taxability of the stand-alone hotel booking transaction in the hands of tour operators," he added.
Therefore, like all other sectors, the tourism and travel industry also has a wish-list. Nirvana Excursions, which offers pre-packaged & customised tours, has come out with one.
Here are some of the key expectations:
- The government should focus its attention on improving the infrastructure of various sections of industry, especially the online and cruise sectors. Cruises still haven't received the due attention it deserves, in spite of being great income generators.
- Also, leniency in tax structure is another measure that would really help the industry by making inbound tourism much more affordable. Far from a good sign, the service tax added at present has Indian travel packages fall back on account of price competitiveness as they are unable to match the prices on holiday packages offered by other countries.
- With start-ups and young businesses coming up with incredible ideas to facilitate industry growth, they must be encouraged by including them in government plans and help them raise seed capital affordably.
