How much impact GST will have on our future trips in India? After lot of discussion and efforts of our present Government, today finally GST is launched in India. From September 2016 (this month GST council was constituted) you all are receiving many information from news channels, newspapers, WhatsApp groups, pop up messages from various news app etc.; how this new tax structure is going to affect our country, our businesses, our home!! From baby milk to luxury car, from online shopping to dining at restaurants, tax structure is changed from today (1st July 2017). Some people are saying, it is a revolution after independence, some are saying it will burden the common people more. For getting any conclusion we have to give some time to stabilize the system.
Since the formation of GST council in September 2016, Council had 18 meetings and 27000+ man hours of intensive work to make the system ready. For the past one month (or more than that), people were busy in working towards implementation of GST in their respective work places. Some were busy in destocking (all the electronics & car manufacturing companies were giving huge discount), some were busy in releasing invoice to the client. As an individual, we all have to see how the new tax structure will impact us. For that, you might have already received many inputs, so I will not go into that.
I am a travel freak and for people like me, who spend a good amount of money into travel expenditure, how will it impact our budget? Is the GST a threat for Tourism!! I tried to research (nothing but again and again search in internet) on the topic and today I will share how GST will impact our future trips inside India.
As you may know that, there are 4 GST tax slab rates, which are- 5%, 12%, 18% & 28%. Some necessary products like milk, curds, baby cereal, food grains and some of the lifesaving medicine are exempted from GST. Today morning Govt. has declared that Agriculture also will be exempted from GST. Some more products or services are also expected to be exempted in future. GST will replace all the existing VAT, excise duty, Octroi, Cess etc for all the states. However the Octroi for Mumbai and J&K will still be applicable until further notice. Any businesses, having turnover less than 20 Lakh (For North East states, it is 10 Lakh) are exempted from GST.
Now for any travel in India, I assumed the following services are mainly being used: Car services, Train/Bus tickets, Airplane Tickets, Hotel &Restaurant. Here are the changes in tax rates:
- Car Hire: For City car hire e.g. Ola/Uber: Prior to GST era the service tax was- 5.6%; Swachh Bharat Cess was- 0.2%; Krishi Kalyan Cess was 0.2%. Total was 6%. Now the GST rate be 5%. Renting a car from Zoom Car also attract a GST rate of 5%, however if the fuel is given by Customer then the GST rates will be 18% from 6% previously.
- Train Ticket: Service tax on train ticket was 4.5% and service charge was 20 per ticket. Current GST charges will be 5%
- Air Fare: Previously the service tax for air fare was 5.6% for economy class and 8.4% for Business Class. In GST era the tax rate for economy class will be 5% and for Business class will be 12%.
- Bus Fare: Bus fare will not have much impact on post GST era. Local bus services are exempted from GST. However on purchase of public transport/ Bus the tax rate has been increased from 15 % to 43% (28% GST + 15% cess). It may have some effect in the fare, which is still not clear.
- Hotel: Earlier there was VAT on the meal charges, Luxury tax on Stay, Service tax on the total amount. The VAT rate was different for each States. It was very complicated. Now in the GST era, the tax slabs (for stay & Food both) are-
- Hotels of below 1000 per night: GST exempted
- Hotels from 1000 to 2500 per night- 12%
- Hotels from 2500-7500 per night (5 Star)- 18%
- Hotels from > 7500 per night -28%
I must say, the effective GST rates is much higher than earlier for luxury/ 5 star hotels, but for small hotel the additional burden will not be much.
- Restaurant: Like Hotels, the tax structure for restaurant was also quite complicated. It was different across various states. VAT used to vary from 5% to 20% depending on state, Service tax 15%, Swachh Bharat Cess 0.5%, Krishi Kalyan Cess 0.5%. In the bill amount, 40% of the total food bill used to be considered for service tax, as the remaining was considered as raw material. It was really difficult to understand and whenever I used to pay the taxes in small restaurants, I had a doubt whether the amount actually is going to Tax authority. Now at least the whole system will be digitalized and more transparency will be there. The current GST rates for restaurant are as follows-
- Non AC Restaurant having turnover less than 50 Lakh: 5% and restaurant of turnover more than 50 Lakh turnover : 12%
- AC Restaurant: 18%
- If you are taking food from restaurant of hotel, you are staying; then the applicable rates will be as aforementioned/ hotel tax rate.
Definitely , the cost of food is going to be higher in post GST era.
India is ranked 3rd among 184 countries in terms of travel & Tourism’s contribution in GDP of the country in 2016. With the hope that GST would not affect our Tourism Industry, which is increasing @9.8% CAGR. To conclude the topic, I can say that, for an average spending travelers, the GST affect will not be much (as only Food & Hotel Bill is going to be higher than earlier). However for people, who stay in luxury hotels and travel by Business Class, the affect will be more. (I think, those people would not bother much to pay this additional amount).