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Industry still struggling to decode GST regime

The Goods and Service Tax (GST) regime implemented on July 1, 2017 has recently completed a year. During the initial months of implementation, the industry faced various challenges right from understanding the norms to integration. Today after a year the tourism and hospitality industry has accepted it, but still trying to cope up with the move. Majority of the industry players feel that the GST is anything but simple.

Speaking about the impact on hospitality industry Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI) said, “Initially GST came as a shock for the industry due to the variable tax bracket based on the hotel room tariffs. The tax rate for eating out at restaurants too was formerly declared at 18 per cent but was later resolved and brought down to five per cent but without Input Tax Credit (ITC), which remains a concern. The non-availability of ITC is a big issue for enterprises since they can no longer set off expenditures on capital investments and rentals which are huge especially in a city like Mumbai. There were many grey areas which caused uncertainties but were clarified and resolved over time by the GST Council.”

Key industry players are very much upbeat about the decision and implementation, but feel that the process should be made more efficient and simpler. Businesses haven’t taken a hit, but the tedious structures are a big turn off.

Mahesh Iyer, CEO, Thomas Cook India said, “While the road to 'One Nation-One Tax' has been a challenging one, the significant achievement must be acknowledged in this year of GST implementation- the Government having put in strong efforts to address various issues including frequent amendments, clarifications and IT related concerns. Considerable intervention is yet required to bring GST to its full efficiency as GST continues to evolve as the law, procedures and rates are modified to suit the complex Indian market. There still seems to be a long way to go in attaining a simplified GST regime. Despite the multiple continuing challenges of adapting to GST across the eco system and the cumbersome compliance process due system challenges from GSTN, our core travel businesses have delivered strong results, thanks to our focused initiatives - to not just grow volumes & productivity, but also protect and enhance margins. Although the process of implementing the GST was complex, it did not have a massive impact on our business.”

On the customer’s front, the process has become too simple now with a unified tax. Earlier, with multiple taxes customers were puzzled with the system, which has changed with GST implementation.

Speaking about the impact and challenges Vishal Suri, Managing Director, SOTC Travel said, “At SOTC, we observed that the GST tax structure has rationalized and simplified travel costs. This comes as a relief to the travel industry as a whole. Since we were prepared for the roll out of GST, we faced lesser concerns while implementing it.  Our observations from the execution of this tax structure were; Simplicity from a customer perspective, since there is a flat five per cent GST on all tour packages i.e the lowest possible rate in the GST regime. Since travel packages qualify for a five per cent rate without input credit, hassles related to credit availment are minimal. However, there have been challenges as well and a few improvements that must be addressed such as; The filing process is too cumbersome and should be simplified; The tech infrastructure administering GST needs improvement; and The refunds, where applicable, need to come in quicker”

The implementation of GST was also considered as a step which would bring the unorganised players to the organised sector. But certain players feel that the move has not helped to bridge this gap.

Jay Kantawala, Founder, WIYO Travel said, “If we look back the GST Implementation since the past year, the biggest issue the travel industry faces is double taxation, hotels / airlines / car rental companies are all charging GST and a travel company adds their GST to their invoices, which increases the cost to the end consumer. Some of the services have Input tax credit, however the process to avail credit is tedious. Considering the issues the travel industry is facing after GST implementation, it is doubtful that GST will help in decreasing the gap between organised and unorganised sector.”

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