On Thursday, The Federation of Associations in Indian Tourism & Hospitality (FAITH) pressed the finance ministry, tourism ministry, and the chief economic advisor to consider the rationalisation of GST across the Indian tourism value chain at the council meeting scheduled for 28 May.
The association has urged the government to initiate the process of reviewing and rationalising GST applicable across all aspects of the industry. FAITH said this move will provide some support as the tourism sector begins its long journey towards recover. It has also put forward a few suggestions to help revive India’s travel and hospitality sector.
FAITH suggested that hotels should be allowed to charge IGST which will enable seamless availability of credit across India to all travel agents and tour operators. This will thereby lead to developing a sustainable domestic holidays, meetings and conventions business within the country.
Another measure proposed is that hotels should be allowed to charge 12% GST with full set-offs, irrespective of their tariff categories. This will ensure that the GST applicable on Indian hospitality becomes more competitive worldwide, as in most tourism focused nations the rate is below 10%.
Likewise, a request was made for restaurants, asking that they be allowed the option of charging 12% GST with full input credit and this should be delinked from room rates where they are part of hotels.
Tour operators should be given a special presumptive GST rate of 1.8% with full GST set-offs. The present rate of 5% without set-offs structurally indicates that tour operators have an inbuilt margin of around 27.8% which is a fundamentally flawed assumption in the internet economy.
The option of a reseller model for charging should be offered to travel agents, as they are distribution arms for airlines. This possibility will empower travel agents to structure optimal partnerships as per their business requirements between their clients and their airline partners.
A recommendation was made for tourist transporters to be allowed the provision for availing GST set-offs on interstate tourist transport taxes, taxes on parking fees and on taxes on fuel to remove input costs.
In addition, as a measure to provide much needed liquidity, FAITH suggests that tourism, travel & hospitality companies be allowed to receive refunds of unutilized GST credit lying with state governments.