Consumer travel unaffected by GST; hospitality sector expresses concern
Travel bookings are noted to have not been affected post GST implementation, according to key industry players. However, the hospitality industry has voiced concerns over the newly implemented tax regime. “The GST for tour packages, both domestic and international, has seen a marginal increase from 4.5 per cent to five per cent, and as such we do not anticipate any impact to holiday demand; in fact, this is seen as a relief by consumers as it compares extremely favourable against the current service tax which saw a doubling of the rate from 4.5 per cent to nine per cent (applicable from January 22, 2017). Again, the increase from 1.5 per cent to 1.8 per cent on international air tickets is marginal and we do not foresee impact; and this applies to domestic air tickets too with a change from 0.75 per cent to 0.9 per cent,” said Debasis Nandy, chief financial officer and president – commercial, finance and accounts, Thomas Cook India.
In the OTA market, Cleartrip has observed a sharp increase in queries around travel related GST since the day of the implementation. While travellers are keen to understand the impact on fares, this has not affected their travel plans. Balu Ramachandran, head – air and distribution, Cleartrip, commented, “GST implementation has been positive on Air demand as we see a week on week increase of volume increase by seven per cent for domestic and nine per cent for international in the week after GST implementation, which is concurrent with an average dip in prices by on per cent and three per cent for domestic and international respectively.”
Post the GST roll out, the MICE related activities have been hit hard, as pointed out by Hotel and Restaurant Association of Western India (HRAWI). One of the anomalies that emerged post GST roll out was that MICE activities and other events held in hotels outside of home state are not eligible for Input Tax Credit (ITC). This has been leading to cancellations and postponements for pre-booked events. HRAWI has also appealed to the government to revisit this particular aspect of the GST. “There is an overall reduction in MICE bookings across hotels in India as compared to the same period last year. Advance bookings are being cancelled and new bookings are not happening. Wedding season, one of the top grossing times for hotel banquet division, is expected to be flat this year. Most companies are considering holding events in the same state where they are registered under GST. Businesses may still have digested the high GST, but without ITC, it just becomes unviable. MICE tourism is too important a segment for the nation to overlook,” said Dilip Datwani, president, HRAWI.
“From a corporate travel perspective, given that the amount can be offset, we do not envisage a downside. However, it is the sheer complexity in the execution/ compliance that we see significant challenges: filing required at multiple levels and hence involving a substantial increase in effort-time,” added Nandy. Affirming the same, Vishal Suri, managing director, SOTC Travel said that five per cent GST rate on tour packages is a welcomed move for consumers. However, high end hotels and business class air travel is going to be costlier under the GST. “Countries that have adapted GST have grown in their GDP. The implementation of GST will now rationalise and simplify tax regime. In the long term, it is expected to enable the much-required growth needed for the travel industry,” he said.
“For corporate travellers who benefit the most post GST changes, with their ability to claim input credit we see a significant jump in volumes by 26 per cent. There is no marked change in the percentage of cancellations and refunds post the implementation,” stated Ramachandran.
The GST Council had constituted eight standing committees and 18 sectoral working groups for smooth rollout of GST. The main job of the standing committee is to provide solutions to the GST council which are suggested by the respective industries. Sungita Sharma, principal commissioner, Central Board of Excise and Customs (CBEC) is representing tourism and travel industry to the GST council. She has been part of several meetings with the industry stakeholder and associations, and feels that there has been a gap in interpretation and the officials are trying their best to assist smooth transitioning. She said, “The tax regime of the new country has a new interface but one needs to pay attention to the detail.” Mentioning the fact that the company officials can reach out to the government for help she said, “The government has set up Seva Kendras across cities in order to assist the companies and the information has been listed online.”
Most countries have implemented ideal GST, with all indirect taxes grouped under one. India is going to implement dual GST with separate central and state component, which further complicates the process. Sachin Jain, additional commissioner, Central Board of Excise and Customs mentioned that the two very important aspects of understanding GST is to know the place of supplier and place of supply. Jain informed, the major concern area for the tour operators has been regarding the registration of their companies. He clarified, “Multiple registration is not required by a firm which is operating out of a specific area and provides service is another state. The matter lies in the format of how the bill is raised and where the service provided, which is further determined by the interstate supply or intrastate supply.”
Two rates have been decided by the council which stand at five per cent without ITC or 18 per cent with ITC. Many of tour operators suggested that there should be no option by the government. Jain stated, “As two options led to confusion among the agents, many members suggested to one rate. But the government has decided to give an option to the agents since everybody functions at a different level. One can pick what best suits their operations. One option might jeopardize the business for many and thus two options by the government will lead to clarity in business.”
Members who are concerned about their CENVAT credit post GST should know that it can be carried forward post GST and availed from the government, asserted Jain.