Chennai: At a time when the industry stakeholders were expecting a tax reduction in the aftermath of demonetisation, the Union Government’s decision to amend CENVAT Credit and Service Tax relevant to the travel and tourism related services has come as a blow to the tourism and travel industry. As per the January 12, 2017 notification, Service Tax applicable on the gross amount from Jan. 22, 2017, combining all the components of services including transportation, accommodation, etc., and the cumulative impact of Service Tax on tour packages is expected to go up to 9 %. This will make their services uncompetitive for their customers, the industry stakeholders feel. Its implementation would lead to a huge slowdown in the industry, which is already struggling for survival.
Sources say hotels may get affected owing to the removal of 1.5 % effective rate to tax margins – now, as the entire accommodation is to be taxed, with input credits.Passing of such credits may be a challenge as the hotel sector is largely unorganised. Hence, clarifications should be issued explaining the amendments, it is pointed out. Terming it as “very unfortunate” sources said the move would make the travel industry uncompetitive.
“Moreover, such an action is totally discriminatory as the export segment which earns foreign exchange for the country is exempted,” a hotelier said. Says a tour operator, “this will lead to doubling of the tax rate on the sector and is bound to be a corresponding increase in tour pricing, which will in turn will be passed on to the customers.”
