The Tourism industry has been one of the largest contributors to India's GDP in recent years increasing from a share of 6.70% in 2017 to 9.20% in 2018. The Government of India ("GOI") over the past few years has taken various supportive measures and has focussed on making India a global tourism destination by promoting schemes like 'Incredible India', 'Atithi Devo Bhava', 'Swadesh Darshan' and 'Pilgrimage Rejuvenation and Spiritual Augmentation Drive' (PRASAD). The World Travel and Tourism Council ("WTTC") 2020 has reported that in the year 2019, tourism generated 39,821 million jobs in India, which is 8.0% of total employment in the year 2019.
The Covid-19 pandemic has severely impacted the tourism industry across the globe covering sectors like hospitality, tour operators, travel agents, air, land and sea transportation industry and others. As per WTCC, the Covid-19 pandemic is expected to cost the tourism industry at least USD 22 billion resulting in a loss of 50 million jobs globally. India is no exception, tourism has witnessed a significant decline during 2020.
In such a situation India is no exception; tourism has witnessed a significant decline during 2020. GOI has a crucial role to play in revival and growth of the tourism industry. GOI needs to take immediate relief measures under the Goods and Services Tax ("GST") to minimize the impact of COVID-19 on tourism industry.
To begin with, reduction in rate of GST is the need of the hour. There are different rates of GST for hotel accommodation starting from 0% to 18% depending upon room tariff. GST on room tariffs above INR 7,500 is 18%, GST on room tariffs between INR 1,000 and INR 7,500 is 12% and room tariffs below INR 1,000 does not attract GST. GOI should consider reduction in GST rate on room tariff between INR 1000 to INR 7500 from the current 12%/18% to 5% immediately for at least 12 months.
Tour operators and travel agents are required to pay GST 18% on commission earned for supplying specified services. A tax holiday may be introduced for a specified period to safeguard the interest and revival of such service providers. Also, Online Tax aggregators ("OTAs") are required to collect Tax collection at source ("TCS") while remitting payments to airlines and hotels. Therefore, exemption on such levy of TCS must also be considered to avoid additional burden of tax.
Availability of Input Tax Credit ("ITC") will be a major concern for tourism industry post COVID-19 on account of blockage of working capital of their business, and it requires a mechanism for optimum flow of ITC. Presently, taxpayers can avail ITC pertaining to financial year (FY) 2019-2020 till due date of furnishing Form GSTR-3B (relating to payment of Tax) for the period ending September 2020. The GOI may extend time limit for availing ITC pertaining to FY 2019-2020 till March 31, 2021, so that the tourism industry can avail maximum ITC and discharge its liability through ITC, hence reducing burden on its cash outflow. Additionally, GOI may increase scope of availing ITC for tourism industry by reducing list of blocked credits under Section 17(5) of the Central Goods and Services Tax Act, 2017.
Presently, ITC is required to be reversed in case recipient of goods or services, or both fails to pay consideration to its supplier within 180 days from date of invoice. In the current situation, where businesses across various sectors are experiencing losses, such reversal of ITC can be suspended till March 31, 2021, for the tourism industry.
Due to Covid-19 pandemic, timely compliance of monthly GST is also proving to be difficult to deal with. Although GOI earlier had extended due dates for filing Form GSTR-3B for taxpayers having turnover of more than INR 5 crores till April 2020, in order to further reduce burden of GST compliances GOI may extend due dates for filing of GST returns for such taxpayers.
Furthermore, currently, taxpayers are required to pay GST on mercantile/billing basis i.e. liability to pay tax arises upon issuance of invoices. In order to protect and safeguard tourism business, GOI may also allow tourism industry to pay GST on receipt/cash basis till March 31, 2021. Additional benefits such as exemption from payment of tax under reverse charge mechanism (RCM) would also help tourism industry to reduce additional burden of tax under GST.
Tourism industry is probably the worst hit sector due to the pandemic and the consequent restrictions imposed during the lockdown period and also beyond. Revival of this industry should be a prime concern for GOI. Tourism industry in India requires a push for its revival and immediate reliefs under GST laws will bring an impetus to this sector to survive from this never-seenbefore global economic crisis.
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