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NEW DELHI : The Federation of Associations in Indian Tourism & Hospitality (FAITH) has requested the Union tourism minister G Kishan Reddy to take up the goods and services tax (GST) concerns of the industry with the Group of Ministers (GOM) to evaluate the tax rate structure.

FAITH, which represents many tourism associations across the country, said that the Indian tourism, travel and hospitality industry is just starting to come out of its worst phase and it is the right time to incentivise both tourism demand and tourism supply through rationalisation of GST rate structure.

The industry body said that hotels should be allowed to charge Integrated Goods and Services Tax (IGST) that will enable seamless availability of credit to all travel agents and tour operators, and will thereby build a sustainable domestic holiday, meetings and conventions business within the country.

It said restaurants should also be allowed the option to charge GST at 12% with full input tax credits, and the rate should be delinked from any room tariffs if they are part of hotels.

The body also added that the tour operators should be charged a special presumptive GST rate of 1.8% with full GST setoffs. GST setoff is paid on inputs available as a credit against GST to be paid on outputs. Input tax credits can be set off against output GST liabilities. The current rate of 5% without setoffs structurally implies that tour operators have an inbuilt margin of around 27.8% which is an inherently flawed assumption in the internet economy.

The body also demanded that travel agents should be allowed the option to explore the reseller model for charging as they are the distribution arms for airlines. This will allow travel agents to structure optimal partnerships as per business requirements between their clients and airline partners.

Moreover, it urged the minister to consider GST refund on purchases by foreign tourists to be implemented as already enacted under GST. Tax Refund for Tourists (TRT) Scheme of the IGST Act and its applicability should be ensured across all the product and tourism services availed by them in India. This will prevent India from exporting its taxes on tourism and will increase our global competitiveness in world tourism, the association said.

It said that industry players must be allowed to get a refund of any unutilized GST credit lying with state governments that will enable them to get much needed liquidity.

According to India Brand Equity Foundation, the tourism and travel industry contributed 6.8% to the gross domestic product of India in 2019.

ABOUT THE AUTHOR

Varuni Khosla

Varuni Khosla is a journalist with close to 14 years of experience in writing business news stories for mainstream newspaper companies like Mint and The Economic Times. She reports and writes on luxury and lifestyle brands, hospitality and tourism news, the business of sports, the business of advertising and marketing and alcohol brands.
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