When the 5 per cent Goods and Services Tax (GST) was announced for services offered by tour operators, it seemed as though such a low tax rate would be a blessing for several tour agents in the state. Alas, that’s not the case as tour agents have pointed out that the 28 per cent GST on five-star hotels will increase the price of tour packages, thereby adversely affecting their business as well.
Panaji
Ernest Dias, chief operating officer, Sita Travels and TCI said, “Tour operators will not benefit from this 5 per cent GST. This is because the 28 per cent GST proposed for hotels will increase the package price, which is not in the interest of tourists. What is not good for tourists is not good for us.”
Dias’ company brings a large number of foreign tourists every year to Goa from UK and other parts of Europe. In recent times, foreign tourists have been complaining about Goa becoming a costlier destination than Turkey, Thailand, Malaysia and even Sri Lanka.
Now, with the 28 per cent GST, it is very likely that five-star hotels will have to hike their tariffs, a move that could drive away foreign tourists, in turn affecting the business of tour operators as well.
Sources also revealed that some five-star hotels have already signed agreements with tour operators to bring foreign tourists in the upcoming tourism season. With the 28 per cent GST coming into effect from July 1, it remains to be seen what will be the fate of these contracts.
Only time will tell whether hotels will increase tariffs or absorb the increase in tax which will lead to a reduction in their profit margins. In any case, the economics of the entire tourism trade will get affected, thus impacting tour operators.
Sheikh Ismail, general manager, Concord Travels & Tours, said, “5 per cent GST on tour operators without any input tax credit will increase the total price for a package, ultimately affecting our business. The news of 28 per cent GST to be levied on five-star hotels has come like a shock to us. Many destination-rural hotels located in the far-flung parts of India are able to survive despite extreme seasonality thanks to earnings in the very narrow tourist season. Now, if the 28 per cent GST is made applicable, it will be a setback for such hotels. Inbound tourism will be a question mark now.”
Despite the proposed 5 per cent GST, tour operators are more concerned about how tourism will survive with 28 per cent GST levied on five-star hotels.
Such operators stand to lose if overall tourism is badly affected.
