FAITH urges GST rationalisation of Indian Tourism Value Chain

The Federation of Associations in Indian Tourism and Hospitality (FAITH) has made suggestions to Finance Ministry, Tourism Ministry & the CEA for GST rationalisation of the Indian Tourism Value Chain, to be taken up in the upcoming GST council meeting the next week. 

FAITH has suggested initiating the process of undertaking a review and rationalisation of GST applicable across different aspects of the Indian tourism, travel and hospitality industry.  They said that this rationalisation will enable some rationale support once the tourism industry attempts to begin its long crawl back from the pandemic. 

Some of the measures proposed are briefly mentioned below: 

  1. Hotels to be allowed to charge IGST which will enable seamless availability of credit across India to all travel agents and tour operators and will thereby lead to building up a sustainable domestic holiday, meetings and conventions business within the country.
  2. Tour operators to be enabled a special presumptive GST rate of 1.8% with full GST setoffs. 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.
  3. Travel agents be also allowed the option of exploring the reseller model for charging as they are distribution arms for airlines. This option will enable travel agents to structure optimal partnerships as per their business requirements between their clients and their airline partners.
  4. Tourist transporters to be allowed the provision for availing GST setoffs on interstate Tourist transport taxes, taxes on parking fees and on taxes on fuel which is their biggest input costs.
  5. Restaurants should be also allowed the option of charging GST at 12% with full Input tax credits and the rate should be delinked from any room tariffs if they are part of hotels.
  6. 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.
  7. Tourism, travel and hospitality players must be allowed to get the refund of unutilised GST credit lying with state governments which will enable them to get much-needed liquidity.
  8. Hotels to be enabled to charge 12% GST with full setoffs irrespective of their tariff categories which will ensure that Indian hospitality GST becomes more competitive globally as in most tourism-focused countries it is below 10 %.

FAITH said that along with being one of the deadliest humanitarian crisis, this pandemic is also the worst ever existential one for the tourism travel and hospitality industry. They believe that these rationalisation measures will provide a stepping stone for the Indian tourism travel and hospitality industry once it attempts its multi-year journey back to recovery. 


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