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Feb 26, 2013, 08.00 PM IST | Source: Moneycontrol.com

Budget 2013-14: Reduce tax burden to boost tourism industry

It is vital for the government to reduce the tax burden on the tourism industry if it wants to achieve the 1 percent share of the international tourist arrivals by 2016 from 0.60 percent at present

Tourism Industry to be treated at Par with Exporters based on its foreign exchange earning

Subhash Goyal

Chairman

STIC Travel Group

Subhash Goyal
STIC Travel Group

"It is vital for the government to reduce the tax burden on the tourism industry if it wants to achieve the 1 percent share of the international tourist arrivals by 2016 from 0.60 percent at present" said Subhash Goyal, chairman, STIC Travel Group.  

In the Budget recommendations, STIC has pleaded for the following:- 

1.  Export Industry Status: Tourism Industry to be treated at Par with Exporters based on its foreign exchange earning. Tourism industry has been discriminated against the exporters and no benefits are being given to tourism which are available to other exporters of goods inspite of the fact that tourism industry is earning foreign exchange and retention of foreign exchange is much higher than any other export oriented industry. In view of discrimination many of tour operators are operating their business by opening office in  neighbouring countries  like Nepal, Bhutan, etc. This is loss of revenue for our country. If the discriminatory taxations norms are withdrawn, such kind of operations may not be needed and revenue will accrue to the government. 

2.  Exemption of Service Tax: Like exporters, based on foreign exchange earnings, tour operators should also get exemption of service tax on the package tours as the payment is received in foreign exchange.  With the service tax added at present, India packages are very cost prohibitive and we cannot match the prices on holiday packages which are on offer by our competitive countries like China, Thailand, Malaysia, Sri Lanka, Singapore Hong Kong etc. 

3.  Multiplicity of service tax on the same transaction of tour operator having cascading effect.

In our service sector, it is a common business practice that services are sub-contracted to the same category of service provider i.e. a tour operator sub-contracts to other tour operator. Eventually on the same transaction, tax is being paid by two tour operators without being allowed the CENVAT Credit. Sometimes, such Transaction is sub-divided between many tour operators. Thus, ultimately on many points, service tax is being charged without giving the benefit of CENVAT Credit, which leads to the multiplicity of the taxes on the same transaction having a serious cascading effect and in some cases the incidence of tax is more than 12.36 percent. 

This is happening frequently in respect of inbound tours. Such multiplicity of service tax leads to the higher cost, which has adverse impact on the foreign tourists which instead of visiting India, prefer to visit   other neighbouring countries. Thus India loses, on the one hand, the foreign exchange and on other hand, it has adverse impact on the creation of employment opportunities.

It is suggested that when the same service provider sub-contracts its activity to the similar service provider, service tax charged by the sub-contractor should be allowed as CENVAT Credit to the main service provider to avoid multiplicity of the service tax on the same transaction. Or provide exemption from charging service tax within the same category of service providers.

4.  Levy of Service Tax on services provide in Nepal, Bhutan, Sri Lanka, etc.

With effect from July 2012, service tax has been levied for the services provided by our members to international tourist who are visiting the neighbouring countires like Nepal, Bhutan, Sril Lanka, Bangla Desh, Maldives etc. which was not there ebfore july 2012. This need to be withdrawn as services are provided outside India. 

This positive decision of tourism tax benefits can really be a game changer for the country and we hope budget will arrive with lot promises and these lecunas will go away. This will in turn benefit tourism in a big away, added Mr. Subhash Goyal.

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