News & Media

GST may make international travel expensive

Jul 12, 2017
  • Published by : DNA
  • Author(s) : Nishant Shah
  • Despite a lower tax rate under goods and services tax (GST), outbound international travellers may have to shell out more than in the previous regime, say tour operators.

    Also, a levy of 12% on currency is also expected to add to customers’ burden.

    “The tax rate under GST (5%) is lower than what it was for service tax (9%). But input credit is not allowed for tour operators under GST; this will cause us to work at a higher base cost and make travel more expensive. Under service tax, we were allowed input tax credit so the final impact on the costing was negligible,” said Viren Batra, co-founder of Mumbai-based Nirvana Excursions.

    Iqbal Mulla, chairman, Global Tourism Council said the increase in the cost of travelling will be counter-productive for the industry as most of the tour operators in India now deal with international outbound tourism.

    “Domestic travelling no doubt has benefited due to GST, but that is not the case with international outbound tourism. The government should rethink their decision and make things easier for the industry and for travellers,” said Mulla.

    Industry insiders claim the problem has been compounded with reports that purchase of foreign currency from banks could attract IGST of 12%, making the notes costlier for the outbound travellers. Banks have sought a clarification from the government on the issue as a notification under GST has exempted rupee note transfer to RBI but not by banks.

    Nishant Shah, partner, economic laws practice, said, “The levy of 5% GST on tour operators is a welcome move considering that most of these services would be in the B2C stream and therefore a reduction from 9% service tax to 5% GST will facilitate the consumers of these services. However, the restriction on availing of input tax credit on procurements will increase the overall tax costs on account of GST in the hands of the tour operators as most input services will be charged GST @ 18% as compared to the erstwhile service tax rate of 15%.”

    The government could have facilitated by allowing credits in the hand of tour operators in relation to certain specific input services which are directly related to the outward supply made by such tour operators, he said.

    With regard to GST notification on the import of foreign currencies, Shah said there is a need for clarification from the government.

    According to India Brand Equity Foundation, a Trust set up by the Ministry of Commerce and Industry, India has emerged as the world’s fastest-growing outbound market The number of Indians travelling overseas is set to rise from around 15 million today to 50 million by 2020.

    An Amadeus-Frost & Sullivan report said that Indians travelling to Asia-Pacific spent $13.3 billion in 2011, which is set to rise to $91 billion by 2030, making Indians second-biggest spenders after China globally on overseas travel.

    EXPENSIVE FLIGHT

    • A levy of 12% on currency is also expected to add to customers’ burden
    • Government should rethink their decision and make things easier, say experts

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