This slide share is about taxation policy in India and its impacts on hospitality and tourism industry. Its single taxation policy.

1. IMPACTES ON
HOSPITALITY AND
TOURISM INDUSTRY
1
SANDEEP
KUMAR
IHTM,MDU

2. GST RATES
GST RAES
WORLDWIDE
INTRODUCTION
SERVICES & TAX
APPLICABLE UNDER
TOURISM & HOTELS
Standard GST Rates
As Per GST Council
No. of Countries :
150 +
1.Existing and Proposed
Tax Structure Model
2. Taxation Powers of state
and Center
Overview of GST
Tourism Industry
world over & India
It’s Significance
All Sectors Tourism
& Hotel
EXISTING &
PROPOSED TAX
STRUCTURE IN
INDIA
IMPACTES ON
HOSPITALITY AND
TOURISM INDUSTRY
SEGEMENTS OF
HOSPITALITY AND
TOURISM INDUSTRY
All Services & Taxes

3. SOURCES ON
BEHALF OF
INDUSTRY
PLAYERS
IMPACTS
IMAJOR ISSUES IN
PRESENT TAX
Views Regarding
GST By Different
Sources
Pros Of GST
Cons Of GST
What the Industry
Players Said
GST IN
HOSPITALITY &
TOURISM
INDUSTRY
CONCLUSIONS

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It is a tax on Goods & Services with
comprehensive & continuous Chain of Set off
benefit from producers to retailer point.
In other words, GST is an Indirect tax which is levy
on manufacture, sale & consumption of all goods
& services.
It substitute most of the indirect taxes like excise,
VAT, Service Tax, Entertainment Tax, Luxury Tax,
CVD as well as SAD.
It is based on the VAT principles .
Introduction/Concept of GST

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It is likely be implemented w.e.f 1St July 2017.
It is expected to be levied only at a destination
level/Real Consumption Place not at a various
points.
Taxation power lies with both in the hands of CG as
well as SG also.
There will be no distinction between goods &
services.
After Introduction of GST, all the traders including
manufacturer will be paying both the type of taxes
(CGST & SGST). (Administered by one authority)

9. GST leads to immense scope, Opportunities as
well as some challenges also.
Centre is empowered to levy GST on Goods &
Services upon the Production stage, while State
have the power to tax on sale of goods.
It subsumes a large no. of central & state taxes
into a single tax.
It is also expected that GST will mitigate the
cascading effect of taxes.
9

10. 10
Existing Tax structure in India
Existing
Tax Structure
Direct Tax
Income
Tax
Wealth
Tax
Indirect
Tax
Central
Tax
Excise
Service
Tax
Custom
State Tax
VAT
Entry Tax,
luxury tax,
Lottery
Tax, etc.

11.  Income Tax – on income, other than agricultural income
 Excise Duty – on goods manufactured or produced in
India
 Custom Duty – on imports and exports
 Service Tax – on specified services
 Central Sales Tax – on inter-State sale of goods
 Rates of Stamp Duty on 10 specified instruments
CONCURRENT LIST OF BOTH
• Stamp Duties, not including rates of stamp duty on 10 specified
instruments.

12.  VAT/Sales Tax - on purchase or sale of goods, other than newspapers,
within a State
 Excise duty - on alcoholic liquor for human consumption
 Rates of Stamp Duty – on other than 10 specified instruments
 Land Revenue
 Tax – on agricultural income
 Toll tax
 􀂾 Taxes on:
 Land and buildings
 Entry of goods in a local Area (Entry Tax or Octroi)
 Consumption or sale of electricity
 Goods and passengers carried by road or inland waterways
 Vehicles
 Professions, Trades, Callings and Employments
 Luxuries, including taxes on entertainment, betting and gambling

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Proposed Tax structure in India
Proposed
Tax Structure
Direct Tax
Income
Tax
Wealth Tax
Indirect Tax
= GST
(Except
customs)
Intra- state
CGST
(Central)
SGST
(State)
Inter State
IGST
(Central)

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Model/Components of GST
CGST
(Central GST)
• Replace central Excise
Duty & service Tax.
• Cover Sale transaction
• Administered by CG
• Additional Excise Duty
• Countervailing
Duty(CVD)
• Additional Duty of
Customs(ADC)
• Surcharge, Education
and Secondary/Higher
Secondary cess
• Levied on all intra-state
sale/supplies of goods
or services.
SGST
(State GST)
• Replace State Vat, Entry
Tax, Entertainment Tax,
& Luxury Tax.
• Cover taxing of Services
• Administered by SG
• Rate can be a bit higher
than CGST rate .
• It is expected that the
duty and tax paid on
closing stock would be
available as credit.
• Levied on all intra-state
sale/supplies of goods
or services.
IGST
(Inter-State
GST)• Levied on all inter –
state supplies of goods
or services which are
sold or transferred.
• Applicable to imports
of goods or services.
• Expected to be equal to
CGST as well as SGST.
• It is expected that the
duty and tax paid on
closing stock would be
available as credit.

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Benefit under GST
Single taxation point.
Uniform tax rate
Common market.
Reduces Transaction cost.
Eliminates the cascading effect of taxes.
Reduces corruption.
Transparency.
Increasing the tax base & raising
compliance.

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Simplified tax laws.
Increase in exports & employments.
GDP Growth -HSBC estimates an 80 basis
point rise in GDP growth over 3-5 years.
NCAER pegs this at 0.9-1
International competitiveness Go Up by about
5%.
Increased FDI
Growth in overall Revenues.
Prevention of unhealthy competition among
states.
Reduction in purchase price.

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19. IMPACTES ON HOSPITALITY AND
TOURISM INDUSTRY
19

20.  Tourism represents world’s third largest export avenue in
terms of global earnings after fuel and chemicals
according to a representative from the UN World Tourism
Organization (UNWTO). Tourism is responsible for one
out of 11 jobs and 10% of the world’s economic output.
 In addition, tourism’s value-added to an economy can also
be increased by attracting a more diverse mix of tourist
arrivals, using e-commerce to broaden the reach of local
tourism businesses, and broadening the offer to include
cultural, wildlife, and heritage tourism.
20

21.  The travel and tourism sector holds great strategic importance in
the Indian economy providing several socio-economic benefits.
 investments in infrastructural facilities such as transportation,
accommodation and other tourism related services lead to an
overall development of infrastructure in the economy.
 Despite that the Tourism Sector, including Inbound Tourism pay
a plethora of taxes and do not get any significant benefits as
compared to other Export sectors. There are multiple taxes
charged on the same Service/ Product offering by the Central as
well as State Governments.
 The Taxes levied on Inbound Tourism is amongst the highest in
the country, and this is one of the major reasons for India losing
Foreign Tourists to competing South East Asian Countries.
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22.  India ranked 3rd among 184 countries in terms of travel and tourism’s total
contribution to GDP in 2016. In India, the sector’s direct contribution to GDP is
expected to grow by 7.9 per cent per annum during 2016–26.
 The travel and tourism sector in India is estimated to account for 9 per cent of
the total employment opportunities generated in the country in 2016, providing
employment to around 38.4 million people during the same year. The number is
expected to rise by 2 per cent per annum to 46.42 million jobs by 2026.
 Travel & tourism’s contribution to capital investment is projected to grow at 6.3
per cent per annum during 2016–26, higher than the global average of 4.5 per
cent.
 Contribution of visitor exports to total exports is estimated to increase at 7.2 per
cent per annum during 2016–2026 compared to the world average of 4.3 per
cent
 100 per cent FDI is allowed under the automatic route in tourism & hospitality,
subject to applicable regulations and laws. 100 per cent FDI allowed in tourism
construction projects, including the development of hotels, resorts and
recreational facilities. Campaigns such as Incredible India & Atithi Devo Bhava
were launched to harness the tourism industry’s potential
 Foreign exchange earnings from tourism accounted for USD21.1 billion in
2015, witnessing growth at a CAGR of 10.5 per cent during 2006–15
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24. Service Tax VAT Customs and Excise Other Taxes
-Room Rentals - Sale of Food and
-Customs duty
payable on import
-Restaurant Services Beverages in -Luxury Tax on room
of capital goods,
-Banquet Services Restaurants rentals
motor cars etc.
- Sale of food under
-Central Excise on
-Convention Services
Banquet
arrangements -Entertainment Tax on
manufacture of
casinos, discos, videos
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- Rent a Cab Services Bakery products
- Dry Cleaning -Sale of goods from - State Excise on State Entry Taxes
Services retail shops Alcohol Permit Taxes
- In room sale of
food (such as in
- Health Club / SPA / room dining, mini
Beauty Parlour bar etc.)
Services -Alcohol Road Tolls
- Internet Services Motor Vehicle Tax
- Money Changing - UDF & PSF at the
Services Airports

25.  Taxation of service offerings at multiple levels in the Tour
Package. This leads to overall taxation to this sector In the
range of 20-27% considering a loss of Input Tax credit of
various taxes, like excise duties, import duties, luxury tax,
entertainment tax etc.
 Differential taxes across states which vary frequently in terms
of Luxury Taxes and Local Vat.
 Very confusing abatement patterns to derive the taxable
component of the services and that too changing very often
 High State Entry/Road Tax on commercial vehicles in certain
states, which is a burden on the Foreign Tourists.
 Many Small Player in the industry so Tax chain break at many
level resulting into higher tax credit loss to players
 No cenvat credit available for the infrastructure development
which is huge cost to the Industry and resulting into higher
costing
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26.  Industry players said:
26
Name Date Remarks
Garish Oberoi
(FHRAI)Vice
President
19 May 2017 The high incidences of taxes will make India uncompetitive when it comes
to tourism as international tourists will skip the country as a destination.
"The initial reaction is of great despair...28 per cent would be the end of
the industry,"
Bharat Malkani
Past
President(HRAWI)
----Do------ "One of the biggest hurdles for Indian hospitality and tourism, in terms of
attracting international tourists is its uncompetitive tax structure".
DilipDatwani
President(HRAWI)
----Do------ The government should realize countries like Myanmar, Thailand,
Singapore, Indonesia and others levy taxes ranging from 5 to 10 per cent.
India cannot afford to have these kind of complex and high GST.
"This is simply not viable. Tourists will simply skip India," he added.
RiyaazAmlani
(NRAI)President
----Do------ 01 applaud the government's effort to keep GST at 5% for restaurants
below 50 lacs and 12% for restaurants without AC
02Are disappointed with the high GST slab of 18 per cent for organized
restaurants and 28 per cent for 5 star restaurants. This will not go a long
way to promote tourism and tourism related jobs",.
“The government has not realized the importance of providing impetus to
hospitality and tourism sectors.
Ritesh Agarwal , OYO
Founder & CEO
----Do------ "A lower tax rate for budget hotels sector will ensure that the industry's
quality upgrade continues while delivering standardized accommodation
to millions of middle- class travelers."
Aashish GuptaCEO of
hospitality industry
body FAITH
20 May 2017 the GST Council failed to “make a correction” in a sector that creates a lot
of jobs. “There was no need to classify certain hotels as pure luxury,” he
said.

27.  Economic times: GST could kill tourism, say industry
players
 The Hindu:01 GST makes India inhospitable, says tourism
sector. Owners of hotels, restaurateurs and tourism-related
facilities disappointed with high rates, say GST is unviable
02Gurbaxish Singh Kohli, senior vice-president, HRAWI
stressed that hospitality is not only a high foreign exchange
grosser, it is also among the largest tax generators. “By the
Prime Minister’s own declarations, the growth of the nation
will parallel the growth of tourism. It’s perplexing that the
industry is being taxed to death. If GST is not reconsidered,
foreign exchange inflow will dry up sooner than later.”

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28. GST Insights, studied Goods and Services Taxes at The Institute of
Chartered Accountants of India
 GST has brought mixed bag rates for tourism industry:
 Travel in economy class of Air, Railways (AC Coaches) will be
cheaper under GST, with tax rate of 5%. Business class travel will
be at 12%.
 Hotels & Restaurants are categorized on Tariffs & Infrastructure.
i.e.
 Hotel Tariff below 1000 = No Tax
 Hotel Tariff b/w 1000- 2500 = 12% Tax
 Hotel Tariff b/w 2500- 5000 = 18% Tax
 Hotel Tariff above 5000 = 28% Tax
 Non- AC Restaurants & No Alcohol = 12% Tax
 AC Restaurant= 18% Tax
 5 star Restaurants = 28% Tax
 Therefore we believe here that people who prefer to stay & enjoy
luxury, GST hasn’t brought much pleasantries for them. However
for a common men it is not a tax burden.
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29.  Apart of that experts observe that the implementation of GST will
provide an edge to the sector by reducing costs for customers,
harmonizing taxes, and reducing business transaction costs.
 Under the GST regime:
Under the Goods and Service Tax, the hospitality sector stands to reap
the benefits of standardized and uniform tax rates, and easy and better
utilization of input tax credit.
 Final cost to end user decreases, we can expect the industry to attract
more overseas tourists as compared to our neighbors.
 This would ideally result in improved revenues for the government.
Although, the Goods and Service Tax paid at 18% is higher than the
prevalent rates, there are many pros to this new tax regime which could
help the industry’s growth in the long run. Let’s have a look at these in
detail:
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30. 1. Administrative Ease
2. Clarity for Consumers
3. Improved Quality of Service
4. Travel will be largely cheaper under GST –
• Air travel in economy class will be cheaper (5% under GST,
against effective rate of 6% currently). Air travel in business class
will be expensive (12% under GST, against the present rate of 9%)
• Train travel in AC coaches will be cheaper (GST rate of 5%). Train
travel in sleeper coaches will be exempt from tax (same as now)
6. Local transport industry will also be cheaper - services of cab
aggregation such as Ola and Uber are likely to be slightly
cheaper since they will be taxed at 5% against the present rate
of 6%. So, moving around in a city will also be cheaper than
the current levels.
7. Hotels are likely to be… cheaper? costlier? It’s complicated!
budget hotels will become cheaper.
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31. 1. Increased Technological Burden
2. Increased Costs
3. Alcohol and electricity are out of the purview of GST net.
4. Lack of Parity with Asian Counterparts
5. Revenue Leakage
6. High rates on luxury hotels could be upsetting
7. Restaurants/Dining/Eating out will become
expensive. These rates are generally higher than the
current rates.
 Non-AC restaurants not serving alcohol: 12%
 AC restaurants will be taxed at 18% GST
 Restaurants serving alcohol (AC or non-AC): 18%
 Five-star restaurants: 28% 31

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CONCLUSION
 GST being a dynamic & comprehensive legislation which shall replace most of the Indirect
Taxes of our Country.
 Since it is a major indirect tax reform in India, there would be new legislation and
procedures.
 Most concerns expressed about the implementation of GST can be divided into 3 categories
:
i) Design Issues ii) Operational Issues iii) Infrastructure Issues
 For GST to be effective there should be identical GST laws /procedures across states as well
as the centre.
 In the mean time ,those state who are not opposing against the implementation of GST may
want assurances that their existing revenues will be protected.
 Companies specializing in food and beverages operations could be the biggest beneficiaries
of GST within the hospitality sector.
 Exclusion of liquor from GST regime defeats the very purpose of bringing in a uniform tax
structure across the nation
 GST is glimmer of hope for the Hotel and Tourism Industry if we can keep the GST rate
between 10 to 15%. GST might herald with its uniformity of tax rates
 Hopefully, GST is going to be an efficient and harmonized consumption or destination
based tax system and will remove the problems faced by the sector