The shipping ministry, which was previously asking for an exemption from GST, was now looking at a “standard GST rate of 12 percent” across the entire cruise industry to maintain revenue inflow
The continuous rate rationalisation exercise under Goods and Services Tax (GST) has become a roadblock for policy makers of cruise tourism who have to rework on the tax structure every time the GST council revises rates.
“Initially, tax rates were fixed as per the previous system of excise and customs… But now, suddenly things have switched to GST,” an official from the government told Moneycontrol adding, “But since GST is an evolving process, things are changing everyday… Even if we fix tax as per existing guidelines, things have to be changed as soon as new orders are passed”.
Ever since GST was rolled out from July 1, it has seen continuous rate rationalisation exercises. In the last GST council meeting, rates of 178 items were reduced.
GST, mooted as the country's biggest indirect tax overhaul, has consolidated a dozen of state and centre duties into one single levy. All goods and services have been fitted into four broad slab structure –5, 12, 18 and 28 percent.
The official said that with every new passing order, the task force and consultants have to re-work on the revenue structure for the industry, which is at a “nascent stage”.
“Government is changing rates everyday so the task force (and the consultants) have to tweak things frequently,” he said. “The revenue implications have to be worked out… Government can’t incur revenue loss”.
Cruise tourism has been one of the “dormant” tourism sectors in India, which is now being promoted to exploit its potential.
According to union minister for shipping, Nitin Gadkari, cruise tourism has potential to generate revenues up to Rs 35,000 crores and employment for over two lakh people.
Ministry of Shipping and Ministry of Tourism are together formulating a policy for cruise in India, which is “at the final stage”.
“All other recommendations have been accepted… Suggestions regarding tax structure, however, were not up to the mark,” the official said.
He said that the system under GST involves different tax rates for different subjects, making the work more “complex” and delaying roll out of the policy.
“GST involves distribution of taxes between Centre and state which is a complex thing,” he said.
Elaborating on one case, the official said that tax levied on cruise ticket varies as per situation. If a ticket is issued from India, for a ship destined abroad, it will be taxed at a different rate than a ticket which is issued by a foreign country for a ship towards India. Tax rate on a cruise ship ticket will be “totally different” if it is a domestic cruise ticket.
“All of this involves a lot of complexities,” he added.
The official said that the ministry, which was previously asking for an exemption from GST, was now looking at a “standard GST rate of 12 percent” as a "service" tax for tour operators.
“We are asking for a uniform rate… around 12 percent, like an air-ticket, to maintain the revenue flow,” he said.
Under the new indirect taxation system, “cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferry boats of all kinds” are to be taxed at five percent. An economy class air-ticket is charged at five percent while business class attracts 12 percent GST.
The official said that the (above mentioned) five percent tax is to be charged on "transportation" while 12 and 18 percent are being charged as per "class of ticket" (economy or business)."This is our recommendation for 12 percent standard tax rate... The consultants will take the final call," he said.