The aim of FAITH’s proposal is to enhance global competitiveness and provide relief to the sector, which is amongst the worst hit by the pandemic.
Against the backdrop of the pandemic, The Federation of Associations in Indian Tourism & Hospitality (FAITH), a conglomeration of travel and hospitality associations, seeks rationalisation in Goods and Service Tax (GST) levied upon the sector. To this end, a proposal has been made to the Government of India’s Finance and Tourism Ministries.
An outline of FAITH’s wish list:
• Hotels be permitted to charge IGST. The objective is to enhance credit availability across the travel and hospital industry’s ecosystem of travel agents and tour operators.
• Tour operators need to be allowed a presumptive GST rate of 1.8% with full GST setoffs. The existing 5% rate without setoffs has been instituted against the belief that tour operators have an inbuilt margin of 27.8%. This assumption no longer holds true in the face of margin erosion due to pricing pressures. The digital economy affords easy access for customers to compare travel and hospitality services and opt for the cheapest one.
• Travel agents to have the option for charging fees under the reseller model. If this proposal is accepted, they will be able to evolve an appropriate business model between client needs and airlines for whom they are channel partners.
• GST setoffs to be allowed for tourist transporters on taxes on fuel and parking charges as well as interstate tourist transport taxes. These levies considerably inflate transporters’ input costs.
• 12% GST be applicable to restaurants with full input tax credits. This rate of taxation should not be linked with room tariffs if restaurants are part of hotels.
• To boost the competitiveness of goods and services provided by the tourism sector, GST refund on purchases by foreign tourists should be implemented as already enacted under GST.
• Tax Refund for Tourists (TRT) Scheme of the IGST Act. The scope of refund should cover all such transactions by international visitors so that India doesn’t export its taxes.
• Unutilised GST credit vested with state governments must be refunded to the tourism, travel, and hospitality sector to shore up liquidity.
• The GST rate for hotels must be uniformly reduced to 12% with full setoffs. In most tourist-friendly countries the applicable GST rate is 10%.