Affiliated to

University of Mumbai

Revised Syllabus for

Programme:
B.Com
Accounting and Finance
Semester VI
Under Choice Based Credit System
Academic Year 2022-2023

PROJECT
( A STUDY OF IMPACT OF GST ON HOSPITALITY &
TRAVEL AND TOURISM INDUSTRY )

1
 PROJECT REPORT
ON
[A STUDY OF IMPACT OF GST ON HOSPITALITY & TRAVEL AND
TOURISM INDUSTRY]
SUBMITTED BY
TYBCom (Accounting and Finance)
(SEMESTER VI)
UNDER THE GUIDANCE OF
VAISHALI OZA
ACADEMIC YEAR
2022 - 2023

2
 DECLARATION

1, Bhakti R Nishar the student of T.Y.BCom (Accounting and

Finance) Semester VI (2022 - 2023) hereby declare that I have
completed the Project on A Study of Impact of GST on Hospitality &
Travel and Tourism Industry.
I also declare that this report which is the partial fulfilment of the
requirement for the degree of T.Y.BCom (Accounting and Finance) of
KES SHROFF COLLEGE OF ARTS AND COMMERCE is the
result of my own efforts with the help of experts.

3
 CERTIFICATE

This is to certify that Ms. Bhakti R Nishar of Third Year B.Com

(Accounting and Finance) Semester VI (2022 - 2023) has
successfully completed the Project on A Study of Impact of
GST on Hospitality & Travel and Tourism Industry as per the
guidelines of KES’ Shroff College of Arts and Commerce,
Kandivali(W), Mumbai-400067.

Head of Department Guide

Dr. Vaibhav R. Ashar VAISHALI OZA

Principal External Examiner

Dr L Bhushan

4
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so

numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this internship.
I take this opportunity to thank the KES SHROFF COLLEGE OF
ARTS AND COMMERCE (AUTONOMOUS) for giving me
chance to present this report.
I am thankful to KES SHROFF COLLEGE OF ARTS AND
COMMERCE (AUTONOMOUS) for providing me opportunity to
work on the project/internship with their company and gaining work
experience.
I would like to thank my Principal, Dr. Lily Bhushan for providing
the support required for the internship.
I take this opportunity to thank our Guide VAISHALI OZA
for her moral support and guidance.
Lastly, I would like to thank each and every person who directly or
indirectly helped me specially my parents and peers who supported
me throughout my project.

5
 LIBRARY ATTENDANCE CERTIFICATE

This is to certify that Ms Bhakti Nishar of third year B.Com

Accounting & Finance having Roll No. 26, division C has
successfully completed his /her minimum hours of attendance in
the library to complete the 100 marks project on topic titled A
Study of Impact of GST on Hospitality & Travel and Tourism
Industry

Sign Sign Sign

Libraria Project Guide Head of Department
n

6
 Executive summary

Goods and Services Tax (GST) is an indirect tax which has replaced many indirect taxes in
India. The Goods and Services Tax Act was passed in Parliament on 29 March 2017. The Act
came into effect on 1 July 2017. GST is a non – discriminatory tax and its effect will be seen
across verticals. The Indian Hospitality and Tourism Industry, which was pegged at USD
136.2 billion at the end of 2016, is one of the sectors which will see major changes post July
2017. The Tourism industry contributes nearly USD 136 billion to India’s GDP and is
expected to further grow to USD 280.5 billion by 2026. India is one of the most popular
tourist destinations in the world. It is so due to its rich heritage, myriad attractions and
delicious food. Tourism in India is important for the country’s economy and its growth
rapidly. The World Travel and Tourism council calculated that Tourism generated Rs 16.91
lakh Cr USD 240 billion) or 9.2 % of India’s GDP in 2018 and supported 42.673 million
jobs, 8.1% of its total employment. Hospitality and Tourism are also among the highest
employment generating sectors and among the top 10 sectors in the country with the highest
volume of foreign direct investment. One of the major benefits of GST to the hospitality and
tourism sector is that it will eliminate multiple taxation by subsuming all taxes previously
livid under one single entity. Benefits of execution of GST will help in reducing business
transaction cost, reducing cost for customers. The Indian tour and travel industry which is
valued at around 22 billion dollars in the year 2019; the tour and travel industry is one of
those sectors which have witnessed significant growth post 2017. Experts witness that the
implementation of new taxation law in the country i.e. Goods and Service Tax (GST) will
further act in the benefit of the tour and travel industry. The GST facilitated growth in the
tourism industry by cutting the cost for the customers, by reducing business transactions,
reducing the taxes, but it also has its own number of challenges.
Though the GST was the most significant tax reform, yet it has attracted an equal number of
acclaim and criticism.
Keywords : GST, Hospitality, Travel, Tourism, India.

INDEX

CHAPTER TOPIC PAGE NO

NO

7
1 INTRODUCTION 9-40
1.1 What is GST
1.2 History of GST in India
1.3 Hospitality and Tourism industry
1.4 Hospitality sector and GST: Before and after
1.5 Rate of GST on Hotel Rooms
1.6 Pre and Post GST for Tourism
1.7 GST Impact
1.8 How Travel & Tourism Industry gets Effected
1.9 GST impact on the travel industry
1.10 Benefits of GST for Tourism Industry
1.11 Market Size
1.12 Tour agents services
1.13 Air travel agents
1.14 GST on E-commerce : online travel bookings
1.15 Segments of Tourism & Hospitality industry
1.16 Pandemic hit GST in travel and tourism sector

2 LITERATURE REVIEW 41-46

3 RESEARCH METHODOLOGY 47-51
3.1 Meaning
3.2 Types of Data Collection
3.3 Objective
3.4 Scope of Study
3.5 Research Design
3.6 Limitation of the Study

4 DATA ANALYSIS 52-60

5 CONCLUSION AND SUGGESTION 61-64
6 WEBLIOGRAPHY 65

CHAPTER 1

INTRODUCTION

8
  1.1 WHAT IS GST

GST has been one of the most awaited tax reforms for India . Due to that burden of taxes can
remove government of India established new taxation condition, that is goods and service tax
GST. GST is a single domestic indirect tax law for the entire country. Under the GST regime,
the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State
GST are charged. All the inter-state sales are chargeable to the Integrated GST.

The goods and services tax (GST) is a tax on goods and services sold domestically for
consumption. The tax is included in the final price and paid by consumers at point of sale and
passed to the government by the seller. The GST is a common tax used by the majority of
countries globally.

Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax
that will be levied on every value addition. In simple words, GST is an indirect tax levied on
the supply of goods and services. GST Law has replaced many indirect tax laws that
previously existed in India.

It leads to a high-cost and inefficient tax structure prone to evasion and revenue leakage.
Hence, the pressing need for a modern integrated goods and services tax (GST), with tax
payable only on the value added at each stage of output and set-offs available along the value
chain, both at the Centre and the states. The GST would amount the result of over 25 years of
indirect tax reforms, which would boost the efficiency of taxation, improve tax enthusiasm
and bring about an integrated market nationally

9
Components of GST There are 3 applicable taxes under GST: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intrastate sale (Eg: Within

Karnataka)
 SGST: Collected by the State Government on an intrastate sale (Eg: Within
Karnataka)
 IGST: Collected by the Central Government for inter-state sale (Eg: Karnataka to
Tamil Nadu)

The impact of the GST on the prices of goods and services largely depend on the item. It will
also depend upon the respective State governments and their intervention with respect to
controlling prices of essential commodities. Broadly, services are expected to become costlier
under the GST regime, as the expected GST rate would be higher than the existing service tax
rate of 15%. Clearly, the GST is expected to bring down prices of indigenously manufactured
goods on account of current effective indirect taxes (central excise @ 12.5%, State VAT @
5%-15% etc.) being higher as compared to recommended lower GST rate @ 5% and standard
GST rates @ 12% and 18%. Thus, price of certain category of goods may come down
depending on the effective rate of indirect taxes being paid at present and the tax brackets
under which goods are classified under the GST.

India have different cultures of every state and have different variety in the food. In India
every states have their own law for tax condition but because of GST various taxes of the
states government will be finished.

10
  1.2 HISTORY OF GST IN INDIA

India’s biggest tax reform in the 70 years of independence is implementation of GST ( Goods
and Services tax ) which will help modernise India as Asia’s third largest economy. The 17
year old dream of GST in India unify the US $2 trillion economy with 1.3 billion people into
a single market.

Nationwide GST ( Goods and Services Tax ) has came into effects from 1 July, 2017. This is
the marvelous way for a new Common National Market and replaced several cascading
indirect taxes levied by the central and state governments.

World’s first country implemented GST is France (1954). More than 160 countries have
implemented GST system. Framework of GST in India had formed 17 years ago. The first
move on GST implementation in India was began on July 17, 2000, under Vajpayee
Government. In 12 August 2016, Assam became the first state to pass GST. On September
23, 2016, GST Network was formed, it is an online network designed to solve the problems
and question of consumers and businessmen.

 HISTORY OF GST IN INDIA – DETAILED

11
During 1999 : The idea of Goods and Services Tax (GST) in India started during
meetingheld in 1999 between Prime Minister Atal Bihari Vajpayee and his economic
advisory panel, which included three former RBI governors namely IG Patel, Bimal Jalan and
C Rangarajan.

2000 : In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee (EC) to
create a structure for GST, based on their experience in designing State VAT.
Representatives from the Centre and states were requested to examine various aspects of the
GST proposal and create reports on the thresholds, exemptions, taxation of inter-state
supplies, and taxation of services. The committee was headed by Asim Dasgupta, the finance
minister of West Bengal. Dasgupta chairedthe committee till 2011.

2004 : A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry,
indicated that the existing tax structure had many issues that would be mitigated by the GST
system.

February 2005 : The finance minister, P. Chidambaram, said that the medium-to-long term
goal of the government was to implement a uniform GST structure across the country,
covering the whole production-distribution chain. This was discussed in the budget session
for the financial year 2005-06.

February 2006 : The finance minister set 1 April 2010 as the GST introduction date.

November 2006 : Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states
will have to prepare and make reforms for the upcoming GST regime.

February 2007 : The 1 April 2010 deadline for GST implementation was retained in the
union budget for 2007-08

February 2008: At the union budget session for 2008-09, the finance minister confirmed that
considerable progress was being made in the preparation of the roadmap for GST. The
targeted timeline for the implementation was confirmed to be 1 April 2010.

July 2009 : Pranab Mukherjee, the new finance minister of India, announced the basic
skeleton of the GST system. The 1 April 2010 deadline was being followed then as well.

November 2009 : The EC that was headed by Asim Dasgupta put forth the First Discussion
Paper (FDP) , describing the proposed GST regime. The paper was expected to start a debate
that would generate further inputs from stakeholders

February 2010 : The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised
commercial taxes in states. Following this, the implementation of GST was pushed by one
year.

12
March 2011 : The government led by the Congress party puts forth the Constitution (115 th

Amendment) Bill for the introduction of GST. Following protest by the opposition party, the
Bill was sent to a standing committee for a detailed examination.

June 2012 : The standing committee starts discussion on the Bill. Opposition parties raise
concerns over the 279B clause that offers additional powers to the Centre over the GST
dispute authority.

November 2012 : P. Chidambaram and the finance ministers of states hold meetings and set
the deadline for resolution of issues as 31 December 2012.

February 2013 : The finance minister, during the budget session, announces that the
government will provide Rs.9,000 crore as compensation to states. He also appeals to the
state finance ministers to work in association with the government for the implementation of
the indirect tax reform

August 2013 : The report created by the standing committee is submitted to the parliament.
Thepanel approves the regulation with few amendments to the provisions for the tax structure
and the mechanism of resolution.

October 2013 : The state of Gujarat opposes the Bill, as it would have to bear a loss of
Rs.14,000crore per annum, owing to the destination-based taxation rule.

May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra
Modi was voted into power at the Centre.

December 2014 : India’s new finance minister, Arun Jaitley, submits the Constitution (122 nd

Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for
discussion to the standing committee.

February 2015 : Jaitley, in his budget speech, indicated that the government is looking to
implement the GST system by 1 April 2016.

13
May 2015 : The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced
that petroleum would be kept out of the ambit of GST for the time being

August 2015 : The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption
had no specific cause

March 2016 : Jaitley says that he is in agreement with the Congress’s demand for the GST
rate not
to be set above 18%. But he is not inclined to fix the rate at 18%. In the future if the
Government, in an unforeseen emergency, is required to raise the tax rate, it would have to
take the permission of the parliament. So, a fixed rate of tax is ruled out

June 2016 : The Ministry of Finance releases the draft model law on GST to the public,
expecting suggestions and views.

August 2016 : The Congress-led opposition finally agrees to the Government’s proposal on
the four
broad amendments to the Bill. The Bill was passed in the Rajya Sabha

September 2016 : The Honourable President of India gives his consent for the Constitution
Amendment Bill to become an Act

2017 : On 16 January, 2017, Jaitley announces 1 July, 2017 as GST roll out deadline.
On 20 March, 2017, Cabinet approved CGST, IGST and UT GST and Compensation bills.
On 27 March, 2017, Lok Sabha and Rajya Sabha pass all the four key GST Bills – Central
GST (CGST), Integrated GST (IGST), State GST (SGST) and Union Territory
GST(UTGST).

On 18 May, 2017, the GST Council fits over 1,200 goods in one of the four rates of GST(5%,
12%, 18%, 24%). On 19 May, 2017, the GST Council decides on 5, 12, 18 and 28 percent as
service tax slabs. On 20 May, 2017, GST Council fixed four GST rate in india (5%, 12%,
18%, 24%)for all goods and services. During Midnight of 30 June, 2017 - GST came into
force across India except Jammu & Kashmir During Midnight of 7 July, 2017 - Jammu and
Kashmir, the only State missed to adopt the Goods and Services Tax (GST) on July 1, finally
joined the GST

GST Rate Classification :

 0% -Essential foods and medicine, newspapers, education service, residential
accommodation.
 0.25% - Diamonds, other precious stones.
 3% - Gold, Silver, platinum. Articles of jewellery.
 5% - Common use items, Sweets, restaurant service, goods transport services.
 12% - Frozen meat, butter and cheese, Namkeeens, Milk beverages.
 18% - Standard rate for goods and service.
 28% - Luxury and sin goods such as motor vehicles

 1.3 Hospitality and Tourism industry

14
 

Nowadays the hospitality sector is the fastest-growing sector. Travel and tourism also include
within the hospitality sector cause further development of the hospitality sector. Hospitality is
all about offering warmth to someone who looks for help at an unknown or unfriendly place.
It refers to the method of receiving and entertaining a guest with an honest image.
lodging and recreation. Never before have such great expectations across sectors been so
pinned on the new union budget with a rising optimism amidst challenging times. Clearly the
new budget 2021 expectations from the travel and hospitality industry are soaring. The 20th
century was a turning point for the hotel industry in India and many business owners entered
into the field. Lodging industry is an administration situated segment which offers numerous
offices. GST will be given out in two ways one is central government (CGST) and second is
state government (SGST) and that both will be applied in every sector, hotel industry also.
Tourism represents the world's third largest export avenue in terms of global earnings after
fuel and chemicals. Modern tourism is closely linked to socio- economic development.
Tourism is responsible for one out of 11 jobs and 10% of the world’s economic output. Apart
from providing employment, income and foreign exchange for the country, the trade in the
tourism sector has an economically positive impact on other associated industries such as
food manufacturing, services, construction, agriculture, handicrafts etc.
Hospitality is not only a high foreign exchange grosser; it is also among the largest tax
generators. There are multiple taxes charged on the same Service Product offering by the
Central as well as State Governments. It is an understanding that 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. On the historic midnight of
30th June 2016, India’s PM Narendra Modi ushered the country into the age of GST – ‘One
Nation One Tax’. Being an impartial tax framework, the effects of GST can be seen across all
domains.
The Indian Tourism industry which was valued at US$ 136.2 in 2016 has also faced the
impact of GST. Endeavour is placed in this article to highlight the GST impact on the travel
and tourism industry in India. India’s biggest tax reform yet has been met with an equal
measure of praise and criticism. While the implementation of the Goods and Service Tax
promises to add a significant edge to the economy, by reducing costs for customers,
integrating taxes, and reducing business transaction costs, it will also increase costs for
businesses as well the burden of compliance
The hospitality and tourism industry is one such sector in the economy that is deliberating
over the new tax regime. Hospitality is one of the most competitive and steadily growing
industries in the country. The tourism industry contributes nearly $136 billion to India’s GDP
and is expected to further grow to US$ 280.5 billion by 2026. Hospitality and tourism are
also among the highest employment generating sectors and among the top 10 sectors in the
country with the highest volume of foreign direct investment. In addition to being one of the
top sources of foreign exchange, tourism is also among the highest tax generating sectors in
the country

15
Significance of tourism industry in India

➢ 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

 1.4 Hospitality sector and GST: Before and after

In the former indirect taxation regime, the state government would first charge VAT, luxury
and entertainment tax, while the central government would then levy a whole different set of

16
taxes such as excise duty, service tax, customs duty and central state tax. Consider the VAT,
for instance, which is often charged by state governments on a value already including an
excise duty. Hence, with different states having their own tax rates, hotels and hospitality
businesses had no option to avail an input tax credit since the burden of central taxes cannot
be set off against state taxes like VAT, or vice versa.
In the previous regime, a hotel with room tariffs exceeding Rs. 1,000 would be liable to pay
15 per cent service tax. A deduction of 40% allowed on the tariff value would bring the
effective rate of service tax down to 9%, but its effect was negligible since the VAT and
luxury tax would still apply. Such a cascading effect of the tax regime rolls down right to the
end customer, who bears the burden of paying taxes on taxes.

Assigning GST rates for hotels and restaurants against annual turnovers is a progressive
move by the authorities. One of the major benefits of GST to the hospitality and tourism
sector is that it will eliminate multiple taxation by subsuming all taxes previously levied
under one single entity. The promise of ‘one nation, one tax’ will also increase the ease of
doing business in the country with the provision of standardized tax rates and flexible criteria
to avail input tax credit. The rates in the overall hospitality sector, however, have a complex
classification and are on the higher end. Since inception the rate applicable for Hospitality
and restaurant services is as follows:

RATE OF GST ON FOOD & BEVERAGES (F&B) SALE

1. All stand-alone restaurants irrespective of air conditioned or otherwise, will attract 5%

without ITC. Food parcels (or takeaways) will also attract 5% GST without ITC.

2. Restaurants in hotel premises having room tariff of less than Rs 7500 per unit per day will
attract GST of 5% without ITC.

3. Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day
(even for a single room) will attract GST of 18% with full ITC.

The GST rates for non-AC restaurants are 12% on food, while AC restaurants and those with
liquor licence, including restaurants in five-star hotels will be levied with 18% GST. Hotels
with room tariffs between Rs. 2,500 and Rs. 7,500 will be charged 18% tax while those with
daily tariffs above Rs. 7,500 will be levied a GST of 28%. However, the GST Council have
after listening to a number of representation from the Industry, agreed to reduce the rate of
services in restaurant at 5%. A detailed study is given towards end of this article.
Dining out will turn cheaper after GST council entered into the issue with the GST Council
slashing the tax on restaurant bills. A uniform 5 per cent tax will be levied for all restaurants,
both air conditioned and non-AC made a big relief to the common people. Earlier a 12 per
cent GST on the food bill is levied in non-AC restaurants and 18 per cent in air-conditioned
ones.
All these restaurants were also given an input tax credit benefit, a facility which sets off tax
paid on inputs against the final tax to be paid by consumers. These restaurants, however, did
not pass on the input tax credit (ITC) benefit to customers and continued to charge the 12 or
18 per cent GST.
Therefore, the ITC facility is being withdrawn and a uniform 5 per cent tax is levied on all
restaurants without the distinction of AC or non-AC, the finance minister explained.

17
Restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied
18 per cent GST but ITC is allowed for them.
Those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 per cent
GST but will not get ITC,. The Federation of Hotel and Restaurant Associations of India
(FHRAI) on Friday said GST Council's decision to cut tax rate for restaurants to 5 per cent
without input tax credit will help restaurants across India rationalise tariffs.

Welcoming the move by the council, the apex industry body said it had sought bringing down
GST rate on restaurants to 12 per cent with input tax credit or at 5 per cent without input tax
credit. This decision of the council was a certainly historic. The very concept of Input Tax
Credit (ITC) is central to GST which is to prevent cascading of taxes."
The top tax rate is now restricted to luxury and demerit goods like pan masala, aerated water
and beverages, cigars and cigarettes, tobacco products, cement, paints, perfumes, ACs, dish
washing machine, washing machine, refrigerators, vacuum cleaners, cars and two-wheelers,
aircraft and yacht.
There is good news for budget conscious travellers as small and budget hotels with daily
room tariffs of Rs. 1,000 will be exempt from the GST schedule, while those charging up to
Rs. 2,500 per day will pay 12. Allotting a lower tax bracket to small restaurants and budget
hotels will help them grow and enable them to enhance their service quality and standards on
a regular basis. Currently, low to medium budget hotels constitute nearly 80% of India’s
hospitality market, so a low tax burden on these hotels will also help create thousands of new
jobs.

 1.5 RATE OF GST ON HOTEL ROOMS

Note – GST is charged based on the Declared Room Tariff which is explained as below:-

“declared tariff includes charges for all amenities provided in the unit of accommodation
(given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but
without excluding any discount offered on the published charges for such unit.”

I) RATE OF GST – Renting of hotels, inns, guest houses, clubs, campsites or other
commercial places meant for residential or lodging purposes:-

1. Declared Room Tariff upto Rs. 999/-: GST @ NIL [Remark – No ITC Credit]
2. Declared Room Tariff from Rs. 1000/- upto Rs. 2499/- : GST @ 12% [ITC Credit allowed]
3. Declared Room Tariff from Rs. 2500/- upto Rs. 7499/- : GST @ 18% [ITC Credit allowed]
4. Declared Room Tariff from Rs. 7500/- and above: GST @ 28% [ITC Credit allowed]

[NOTE: GST Rate is decided on the basis of Declared Room Tariff but the tax is chargeable
only on the actual amount charged from the customer/ guest]

 1.6Pre and Post GST for Tourism

How things were Pre-GST for Tourism Sector?

18
Before GST was rolled out, the tourism industry was liable to pay multiple taxes (VAT,
luxury tax, and service tax). Let us take the example of a hotel whose room tariff is greater
than INR 1000, this hotel was liable to charge a service tax of 15%. However, the effective
rate of service tax was dragged down to 9% as the Laws under VAT regime gave an
abatement of 40% on the tariff value. Next, the Value Added Tax (12-14.5%) and luxury tax
were added on top of this.

An abatement of 60% for Restaurants brought the effective rate of interest to 6% on F&B
bills, apart from VAT (12-14.5%).

In case of Social functions like seminars, marriages etc. the bills were taxed with an
abatement of 30% under bundled services.
This VAT tax regime increased the final cost as an end user or customer paid a tax on tax.
This was termed as cascading tax for consumer or end user. Tourism businesses and hoteliers
could not avail any input tax credit on the taxes they paid, as state taxes like VAT could not
be set off against central taxes like service tax and vice versa.

How things are Under GST for Indian Tourism?

With the motto “Atithi Devo Bhava” (‘the guest is equivalent to God’) Indian tourism
industry was expected to reap great benefits under the new GST regime. Due to uniform tax
rates and better use of input tax credit, the final cost for end-user was perceived to decrease
which in turn would attract more foreign tourists. This meant more revenue for the
government and assist in the growth of the industry.

However, confusion and lack of lucidity around GST has complicated the process and created
trouble for consumers booking hotels during peak tourist season. As per government
guidelines hotels with declared tariffs of Rs 7500 and above can charge 28% GST. But hotel
owners explained that declared tariff was imprecise and unclear as prices of hotel rooms vary
with seasons. Depending on the influx of people hotels could implement new tariffs several
times during a year. Hence the term is misunderstood and creates confusion among travellers.

From the inception as recommended by GST Council and subsequently the law that have
been framed, hotels with tariffs less than Rs 1,000 are GST free. Hotel Rooms for Rs 1,000-
2,500 are taxed at 12% while those with a tariff of Rs 2,500- 7,500 are liable for 18% tax and
those above Rs 7,500 are taxed at 28%.

However, it could be understood that hotels depend on tourist seasons for good business,
hence the invoice value should be considered for calculating the GST rate in hotels. The tax
slabs appear to create confusion among customers and the solution ahead as suggested by
experts is to charge taxes on invoice or transaction value rather than the declared tariffs

A general view of GST rate in tourism industry

NO SERVICES RATE OF
. TAX UNDER

19
 GST
1.
Services by a hotel, guest house, or club, etc. for lodging or residential Exempted
purposes, with declared tariff of a accommodation unit less than one Services.
thousand rupees for each day or equivalent

2.
Renting of hotels guest houses or clubs or other commercial places 12%
intended for lodging or residential purposes with room tariff Rs.1000
and more but less than Rs.2500 per room for each day.

3.
Renting of hotels, guest houses, or clubs, and other commercial places 18%
meant for lodging or residential purposes and room tariff of Rs 2500/
and more but less than Rs 7500/- per room each day.

4.
Accommodation in 5 star and high rated hotels, hotels with inns, guest 28%
houses, or clubs or other commercial places intended for lodging or
residential purposes, where room rent is Rs 7500/- and more per night
each room.

5.
Supply of Food or drinks in restaurant without the facility of central 12%
heating or any air-conditioner any time throughout the year and
without the license to serve liquor.

6.
Supply of Food or drinks in restaurants with the license to serve liquor. 18%

7.
Supply of Food or drinks in restaurant with the facility of central 18%
heating or air-conditioner or at any time throughout the year.

8.
Food Supply in catering service 18%

 1.7GST IMPACT

20
Tourism sector shall be impacted both positively and negatively under the gst regime

Positive :

1. Uniformity in Taxes
The multiple taxes would be replaced by one single tax, the rate of which is likely to be
between 16%-18%. The sector may benefit in the form of lower tax rates which should help
in attracting more tourists in India.

2. Increased Revenue for State Government

Under GST the place of supply is shifted to the place where immovable property is situated in
case of Hotels, Restaurant & Monuments for sightseeing. This will increase the revenue of
such states where immovable property is located. Currently, on such income, States charges
local Luxury Tax on hotel stay and VAT on food supplied. While Union Government gets
revenue from Service Tax on such services. Because of GST, the States having maximum
tourist places, hotels or restaurants for tourist shall earn the maximum revenue by way of
SGST which will be equivalent to CGST. In the case of Passenger traveling, the state with the
maximum outbound journey shall earn the highest revenue so the station or the port having
highest outbound flights, train journey or local cab journey shall earn substantial revenue.

3. Saving in Food and Beverage operations

Companies specializing in food and beverages operations could be the biggest beneficiaries
of GST within the hospitality sector. Food and beverages bills have multiple components
which inflate the bills by 30- 35%. It is expected that GST to result in savings of 10-15% on
the overall bill.

Negative :

21
1. Multiple Registration
Service providers having centralized registration will have to get registered in each state from
where they provide services. Although Government has been claiming “One Nation One
Tax”, practically it is not going to be so. Service providers will have an option to take
different registration for separate business verticals which need to be examined on a case by
case basis. Every state has been constitutionally granted right to collect GST on services.

2. Increased Compliance Burden

The procedure for all the invoices/receipts towards inward and outward supplies will become
cumbersome as each one of them will have to be uploaded in the system. The concept of
credit matching under GST would be very difficult to handle and would lead to increase in
working capital requirements. The frequency and number of returns to be filed will go up. In
place of a half yearly service tax return, under GST law, one will be required to file state wise
monthly three GST returns along with an annual return will also be required to be filed.

3. No Credit on Work Contract Services

The hotel industry spends a lot of money on construction and renovation. The money paid as
taxes on the works contract services when supplied for construction of an immovable
property is not allowed for this sector when such services are not used for the further supply
of works contract service. This would have a negative cascading effect despite strong
promises being made by the government in this regard. Any proposal to make supplier of
goods or services liable to pay tax under reverse charge when receiving supply from an
unregistered supplier can increase burden in case of B2B transactions on registered assesses.

4. Liquor not included

Liquor should have been included in GST to ensure the seamless credit for the tourism
industry. Exclusion of liquor from GST regime defeats the very purpose of bringing in a
uniform tax structure across the nation.

 1.8 HOW TRAVEL & TOURISM INDUSTRY GETS AFFECTED

22
Tourism Industry and travel and tour agents in particular are facing a tough time due to
various factors like no commission by the airlines, direct marketing of airlines, higher
taxation, poor tourist infrastructure etc. Their major sources of income are listed below:

1. Commission from Airlines, Cruise Companies, Travel Insurance Companies and similar
companies.
2. Sale Tour Packages, both inbound and outbound.
3. Travel Related Services like Visa, Passport etc.

One has to understand that an airline or a cruise ticket or the travel insurance policy issued by
insurance companies is a contract between the airline/cruise/insurance company and the
passenger. The travel agent is only a facilitator who receives commission from the
companies. Hence GST on these ticket/ policy will only be consumed by the passenger and
the agent cannot use them as their input credit. However, the agent has to pay GST on the
commission received from the airline/cruise/ insurance companies on the reverse basis. If the
agent collects Service Fee as an additional charge from the passenger and show it in the
invoice separately, he can add GST on the service fee in the invoice and collect the same
from the passenger

 COMPOSITION SCHEME IN TOURISM SECTOR

Composition scheme can be availed in tourism sector by the supplier who is engaged in
providing any service or in any other manner whatsoever, of goods, being food or any other
article for human consumption or any drink (other than alcoholic liquor for human
consumption).

Person whose aggregate turnover in the preceding financial year did not have 50 lakh rupees
and not having any Inter State Supply and was neither a casual taxable person nor a non-
resident taxable person, can avail the benefit under composition scheme. Rate of Tax in case

23
of Composition scheme shall not exceed 2.5% of CGST as well as 2.5% of SGST totalling to
5%.

Composition scheme proposed for restaurant, catering business which will exclude many
small players out of the tax credit chain and may result into additional cascading effect in
case of B2B transactions. Assesses opting for composition scheme shall not be entitled to
take any credit. However, they need to pay Tax under RCM if they have any inward supply
from specified person and that shall add on to their cost. Person foregoing negligible amount
of input tax credit, can benefit by opting for composition scheme since their total output
liability shall reduce to 5% (2.5% CGST+ 2.5% SGST) as against current liability of 9% -
10%.

 DO YOU HAVE TO REGISTER UNDER GST?

Travel agents / Tour Operators have to register for GST if they are providing supply of
taxable services in the course of their commercial activities in India and the total (gross)
taxable revenue, including of their agents is more than `20,00,000. While they do not have to
register if their taxable revenue is `20,00,000 or less, they may be able to register voluntarily
to claim the input tax credit on services purchased. The following two persons must register
for GST, even if their total taxable revenue is less than `20,00,000 threshold: - Tour & Travel
agent who sold tour packages / air-tickets on behalf of other taxable person whether as agent
or otherwise. - Tour Operator selling inter-state tour packages to registered taxable person. -
Non-resident tour & travel agents

TRAVEL INSURANCE

Supply of travel insurance services for an inbound/outbound tour is taxed at applicable rates
and the premium charged is subject to GST at 18%. The arranging of travel insurance for
inbound or outbound tour is taxed at applicable rates and the commission charged for such a
supply is subject to GST at 18%..

CANCELLATION FEES

All cancellation fees are subject to GST at 5%. Credit note is allowed to be issued for
cancellation of air ticket or tour package and GST must be adjusted accordingly. Any
amendment charges are subject to GST at 5% for inbound/ outbound tour package and
domestic air tickets. Amendment charges for outbound tour package and international air
ticket are subject to GST at 5%. Arranging for visa and visa fees; (the service or
administrative fees imposed) is subject to GST at 18%.

 1.9GST IMPACT ON THE TRAVEL INDUSTRY

24
The taxable supplies for the travel industry are as follows:

(a) Inbound tour packages (domestic tour), whether sold to Indian resident or Foreign
resident.
(b) Outbound tour packages (international tour) sold to Indian IMPACT OF GST ON
TOURISM AND HOSPITALITY SECTOR ARTICLE CHARTERED SECRETARY I
JULY 2017 61 residents.
(c) Agency services.
(d) Passenger Transportation services (Sea, Land and Air Transport)

Some of the related taxable purchases in the Travel Industry which are subject to GST are as
follows:-

(a) Hotel Accommodation;

(b) Transportation/ hire of vehicles /car hire;
(c) Tour package
(d) Restaurant meals and dining places;
(e) Tickets for entry to exhibitions, entertainment venues;
(f) Hospitality (spas and resort);
(g) Agency commission;
(h) Booking Fees;
(i) Tourist Guide;
(j) Tour Deposit;
(k) Amendment Charges for Inbound/Outbound Tour Package and Domestic Air Ticket;
(l) Travel Insurance;
(m) Visa Service Fees;
(n) Other related tourism services

 1.10 Benefits of GST for Tourism Industry

25
If properly implemented the GST can prove to be a major benefit for the tourism and
hospitality industry. The process to claim and avail ITC (input tax credit) is simple and clear.
Earlier, adjusting the tax paid on inputs against the output was complex and error-prone. This
is believed to have become easy with GST. Also, under GST, tourists have a clearer idea
about the tax they are paying.

In general a large Indian demographic is still taking its first baby steps in accepting and living
– a digital lifestyle. These include people from all sectors – social as well as finance. GST in
layman terms makes the government tax revenue generation process better and easier.GST
increases costs and compliances for the taxpayer, especially the business owners. Businesses
will try to recover the additional cost from their customers. The tax rate on hospitality
industry is less than 10% in Japan and Singapore. In order to compete in the global
competition, there were suggestions for a GST rate of 5%, but GST Council felt that 18% was
the right tax rate.

India has been a hotspot for International and local tourists since ages. India’s Tourism and
Hospitality industry is set poised to grow to US$280.5 billion by 2025. By strong
implementation and closing prevailing loopholes, the initial setbacks in policy
implementation can surely be overcome. For now, let’s just hope that the traveller who visits
this beautiful country goes back with memories and experiences worth in Gold.

26
1.11MARKET SIZE

India is the most digitally advanced traveller nation in terms of digital tools being used for
planning, booking, and experiencing a journey. India’s rising middle class and increasing
disposable income has supported the growth of domestic and outbound tourism.
By 2028, Indian tourism and hospitality is expected to earn US$ 50.9 billion as visitor
exports compared with US$ 28.9 billion in 2018.
The travel market in India is projected to reach US$ 125 billion by FY27 from an estimated
US$ 75 billion in FY20.

The Indian airline travel market was estimated at ~US$ 20 billion and is projected to double
in size by FY27 due to improving airport infrastructure and growing access to passports.

The Indian hotel market including domestic, inbound and outbound was estimated at ~US$
32 billion in FY20 and is expected to reach ~US$ 52 billion by FY27, driven by the surging
demand from travellers and sustained efforts of travel agents to boost the market.

During 2019, foreign tourist arrivals (FTAs) in India stood at 10.93 million, achieving a
growth rate of 3.5% y-o-y. During 2019, FEEs from tourism increased 4.8% y-o-y to Rs.
1,94,881 crore (US$ 29.96 billion). In 2019, arrivals through e-Tourist Visa increased by
23.6% y-o-y to 2.9 million. In 2020, FTAs decreased by 75.5% YoY to 2.68 million and
arrivals through e-Tourist Visa (Jan-Nov) decreased by 67.2% YoY to 0.84 million. As of
March 2021, the e-Tourist Visa facility was extended to citizens of 171 countries.

27
In April 2021, the percentage share of FTAs was highest from USA (26.85%), followed by
Bangladesh (15.65%), Afghanistan (6.92%), UK (5.87%), Nepal (4.59%), Canada (4.27%),
Iraq (2.99%), Portugal (2.40%), Germany (1.42%), Russian Fed (1.41%) Maldives (1.39%),
France (1.33%), Sudan (1.21%), Korea (Rep.) (1.18%), and Australia (1.02%).

In April 2021, the percentage share of FTAs in India was highest at Bengaluru Airport
(29.96%), followed by Mumbai Airport (17.48%), Ahmedabad Airport (15.72%), Delhi
Airport (9.21%), Cochin Airport (4.91%), Chennai Airport (4.04%), Hyderabad Airport
(3.34%), Lucknow Airport (2.40%), Bhavnagar Seaport (2.37%), Kolkata Airport (2.11%),
Calicut Airport (1.41%), Amritsar Airport (1.35%), Kakinada Seaport (1.32%), Dabolim
(Goa) (0.91%), Mangalore Airport (0.72%).

Between January 2021 and April 2021, FTAs was 376,083 as compared with 2.35 million
between January 2020 and April 2020, registering a negative growth of -84.0% Y-o-Y due to
COVID-19.

By 2028, international tourist arrivals are expected to reach 30.5 billion and generate revenue
over US$ 59 billion. However, domestic tourists are expected to drive the growth, post
pandemic.

International hotel chains are increasing their presence in the country, and it will account for
around 47% share in the tourism and hospitality sector of India by 2020 and 50% by 2022.

As per the Federation of Hotel & Restaurant Associations of India (FHRAI), in FY21, the
Indian hotel industry has taken a hit of >Rs. 1.30 lakh crore (US$ 17.81 billion) in revenue
due to impact of the COVID-19 pandemic.

The United Nations World Tourism Organisation selected Pochampally in Telangana as one
of the best tourism villages in November 2021.

28
  1.12 TOUR AGENTS SERVICES

The travel and Tourism sector holds great strategic importance in the Indian economy,
providing several socio-economic benefits. Apart from providing employment, income,
foreign exchange for the country, the trade in the tourism sector has an economically positive
impact on other associated industries such as food manufacturing, services, construction, etc.
In addition, investments in infrastructural facilities such as transportation, accommodation,
and other tourism-related services lead to the overall development of infrastructure in the
economy.
The tourism and Hospitality Industry have various segments like Accommodation and
catering, Transportation, Attractions (Theme Park, Monuments, Nature, events) & travel
agency/ tour operators.

‘Tour operator’ means any person engaged in the business of planning, scheduling,
organizing, arranging tours (which may include arrangements for accommodation,
sightseeing, or other similar services) by any mode of transport, and includes any person
engaged in the business of operating tours.

Person who makes taxable supply of goods or service or both on behalf of other taxable
person whether as an agent or otherwise, such as Air Travel Agent.

Which tax to be imposed -IGST OR CGST+SGST

In terms of Sec. 12(2) of IGST Act, When an Air Travel Agent provides services to a person
who is located in India and the person is registered under the GST law then the place of
Supply shall be the location of service receiver.

If the services are provided to a person located in India but not registered under the GST Law
but his address is available on records then the place of Supply shall be the location of the
service receiver.

If the services are provided to a person located in India but not registered under the GST Law
and his address is not available on records then the place of Supply shall be the location of
the service provider.

In case the recipient is outside India

Further as per section 13(2) of IGST Act, The place of supply of services shall be the location
of the recipient of services: Provided that where the location of the recipient of services is not
available in the ordinary course of business, the place of supply shall be the location of the
supplier of services

PLACE OF SUPPLY AND APPLICABLE TAX UNDER DIFFERENT SCENARIO

UNDER GST FOR TRAVEL AGENTS AND TOUR OPERATORS.

29
Air Travel Agents also gets segment pay out from Computer reservation system or Global
Distribution system for reservations i .e. ATAs use software’s of certain companies to book
tickets like Amadeus India, World span, Galileo and Abacus. Revenue of these companies
depends on number of flight reservation segments booked using their software. This way they
get paid by the airlines for every flight reservation.

Place of Supply of services shall be as per the general rule which says that it shall be the
location of Service Receiver i.e. the place where the software company is registered. In case
the services are provided by the ATA to Foreign Software Companies then the ATA would
fall within the meaning of an ‘intermediary’ and hence the place of supply shall be the
location of service provider i .e. the ATA in this case.

30
  1.13Air Travel Agent

An Air Travel Agent earns two types of income:

1. commission from the Airlines for booking of air tickets;
2. income in the form of processing fees etc. from the client for whom he books the tickets.

So the Air Travel Agent shall be raising below 2 types of invoices containing the details of
name, address, GST Registration Numbers of the parties to whom the invoice is being issued
and details about Place of Supply.:
1. On the Airlines for commission for selling its Air tickets;
2. On the Air traveler for its processing fees/ service charges / facilitation charges.

As per rule 32(3) of CGST Rules, the value of supply of services in relation to booking of
tickets for travel by air provided by an air travel agent, shall be deemed to be an amount
calculated at the rate of:

1. 5%of the basic fare in the case of domestic bookings, and

2. 10%of the basic fare in the case of international bookings

Explanation – For the purposes of this sub-rule, the expression “basic fare” means that part of
the air fare on which commission is normally paid to the air travel agent by the airline. So,
GST is payable is as par below chart

31
Place of supply for an Air Travel Agent (ATA) for booking tickets to Pax

When an Air Travel Agent provides services to a person who is:

1. Located in India and the person is registered under the GST law then, the place of Supply
shall be the location of service receiver;
2. Located in India but not registered under the GST Law but his address is available on
records then the place of Supply shall be the location of the service receiver;
3. Located in India but not registered under the GST Law and his address is not available on
records then the place of Supply shall be the location of the service provider;
4. If in case of the Air Travel Agent who is located in India but the Origin and Location of
Airlines is not from India and the destination as well as location of passenger is not in India.

Then in the given case neither the Airlines nor the passenger will be registered under GST
and nor will their address be available from the records, hence in the given case the place of
supply shall be the location of service provider i.e. the location of the Air Travel Agent which
is in India and hence this transaction would be liable to Tax.

AIR TICKETING SERVICE FEE

• Profit mark-up/service fee charged for domestic flight is subject to GST at 18%
• Profit mark-up/service fee charged for international flight dis-embarking from India, is
subject to GST at 18%
• If any service fee charged separately, then it is subject to GST @ 18%
. • Any commission received from airline is subject to GST @ 18%

TOUR PACKAGES

Supply of Tour operator’s services are taxable at the rate of 5%. No input tax credit will be
allowed when the rate of 5% is charged. When supply is made to a registered person, GST of
5% will be charged depending upon the location of recipient of services i.e. Customer.
Taxable invoice will be issued at the Customer’s registered address under GST. When supply
is made to an unregistered person, GST will be charged depending upon the location of Tour
Operator. Bill of supply will be issued for the services rendered by Tour Operator. The tour
operator has to identify the nature of supply i.e. whether the tour package services are intra-
state or inter-state, which in turn depends upon whether the recipient of service is registered
or UN-registered.

32
 1.14GST on E-Commerce : Online travel agents

Online travel agents fall into the category of e-commerce operators and can deduct 1 per cent
tax collected at source (TCS) under the GST, the Central Board of Excise and Customs
(CBEC) said on Tuesday.
"Online travel agents providing services through digital or electronic platform will fall under
the category of e-commerce operators (ECO) liable to deduct TCS under Section 52 of the
CGST Act, 2017," CBEC said here in a fresh set of frequently asked questions (FAQs).
The e-commerce operator is required to collect an amount at the rate of one per cent (0.5 per
cent Central GST plus 0.5 per cent State GST) of the net value of taxable supplies made
through it. The amount so collected is called as TCS.
The benefit of threshold exemption of Rs 20 lakh turnover is not available to e-commerce
operators and they are liable to be registered irrespective of the value of supply made by
them.
"Threshold exemption is not available to e-commerce operators who are required to pay tax
on notified services supplied through them," it said.
"Section 52(1) of the CGST Act, 2017 mandates that TCS is to be collected on the net taxable
value of such supplies in respect of which the ECO collects the consideration," the CBEC
said.
CBEC said that TCS is to be collected on the "net value of taxable supplies" made through an
ECO and if the supply itself is not taxable, the question of TCS does not arise.
The net value of taxable supplies means the aggregate value of taxable supplies of goods or
services or both, other than the services on which entire tax is payable by the e-commerce
operator, made during any month by all registered persons through such operator reduced by
the aggregate value of taxable supplies returned to the suppliers during the said month.
In cases where someone is selling their own products through a website, there is no
requirement to collect tax at source.

The e-commerce operator needs to make the collection during the month in which the
consideration amount is collected from the recipient.
The amount collected by the operator is to be paid to the government within 10 days after the
end of the month in which amount was so collected.
The details of supplies furnished by every operator in his statement for the month will be
matched with the corresponding details of outward supplies furnished by the supplier
concerned in his valid return for the same month or any preceding month. Where the details
of outward supplies declared by the operator in his statement do not match with the
corresponding details declared by the supplier, the discrepancy shall be communicated to
both persons.
The supplier in whose out tax liability any amount has been added, shall be liable to pay the
tax payable in respect of such supply along with interest on the amount so added from the
date such tax was due till the date of its payment.

33
‘Tour Operator’ shall mean any person engaged in the business of planning, scheduling,
organizing, arranging tours (which may include arrangements for accommodation,
sightseeing or other similar services) by any mode of transport, and includes any person
engaged in the business of operating tours.The definition is provided by the Explanation in
Heading 9985 of GST Tariff Act, 2017.
“Intermediary” means an agent, a broker or any other person, by whatever name called, who
arranges or facilitates the supply of goods or services or both, or securities, between two or
more persons, but does not include a person who supplies such goods or services or both or
securities on his own account”

A graphical flow chart will explain both the options in much better way,

34
  1.15 SEGMENTS OF TOURISM & HOSPITALITY INDUSTRY

(Source: IBEF Presentation on tourism industry)

Employment in each sector:

Hospitality Sector includes the Food and Beverage and the Accommodations Sector
(basically the reception and entertainment of visitors) Employment in each sector:

 Food & Beverage – 48%

 Transportation – 22%
 Accommodations – 18%
 Attractions – 8%
 All Other Sectors – 9%

35
 1.16PANDEMIC HIT GST ON TRAVEL AND TOURISM
SECTOR

Travel and tourism companies, struggling with the impact of restrictions imposed on account
of COVID-19, are hoping for some relief from the government in the form of a cut in the
goods and services tax rate to a flat 5 percent, easier liquidity norms and softer loan
repayment terms.
Executives said that with the coronavirus pandemic having hit their sector hard, the current
rates of GST, which can go up to 18 percent depending on the size of operations, are not
feasible.

The Indian Association of Tour Operators, a grouping of over 1,600 members including
travel agents, hotels, airlines and transport operators, had written to the Union government
asking for a rationalisation of GST rates. However, the issue was not discussed at the 44th
GST Council meeting held on June 12, when rates for various COVID-related medical
supplies were reduced.

For hotels and airlines, GST depends on the tariffs. A room that costs upwards of Rs 7,500
daily attracts GST of 18%, while a tariff between Rs 1,000 and Rs 7,500 is subject to 12%
tax. GST isn’t applicable if the daily room rate is less than Rs 1,000.

Restaurants in hotels are subject to 18% GST if the daily room tariff is above Rs 7,500. If it’s
less, GST stands at 5%. For airlines, business class tickets come with 12% GST and economy
fares attract 5%.

Officials and executives from the sector say the various slabs should be scrapped and a flat
5% rate should be introduced in the hospitality sector, at least until the end of the pandemic.

However, some experts are of the view that vaccinations would be a sure-shot way of getting
business moving in the tourism sector and are not sure if lower taxes alone would help.
“Being an indirect tax, GST is passed on to the ultimate consumer, bundled with the price of
the services,” MS Mani, a senior director with Deloitte India, told Money control. “Any move
to rationalise the tax rates can only be positive, but it is difficult to say whether that alone can
improve business for them.”
Sudhir Patil, managing director of Veena World, a company that organises tours and
customised holidays, said rationalising GST will make travel more affordable for customers.

While a lower tax rate may spur domestic travel, international travel may still remain out of
bounds.
We are not expecting international travel to resume any time soon. The hope is that domestic
tourism picks up over the next few months,.
There are expectations that pent-up travel demand will kick in shortly. A quick trip to a hill
station or beach resort after a stressful exam season or a luxury resort stay for tired corporate

36
executives is what the sector expects. But even in domestic travel, there is no uniformity in
policies.
“Maharashtra, for example, insists on producing RT-PCR certificates, whereas many other
states don’t,” said Patil. “There seems to be no communication between states in this regard.
No one is talking to each other, trying to come up with solutions. As it is, the tourism
department is the most neglected department in most states in India.”
The authorities have taken some steps to support the sector. In March, the government
expanded the scope of the Emergency Credit Line Guarantee Scheme to cover entities in
hospitality, travel & tourism, leisure and sporting.
The Reserve Bank of India extended a Rs 15,000 crore liquidity window to support the travel
and tourism sector on June 4. The scheme allows banks to offer loans to hotels and
restaurants, travel agents and tour operators.
Rating company ICRA has said the real impact of this measure remains to be seen. About
70% of the hospitality entities are already on a negative credit outlook, compared with 92%
of the entities with a stable outlook in January 2020.
The Federation of Hotel & Restaurant Associations of India said that while liquidity infusion
will provide cash-strapped hospitality businesses some impetus, the duration of the scheme
should be increased to at least five years from the three years stated.
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

37
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 lock-down 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-seen before global economic crisis.
The Increment in the State Government Revenue
With the new reform in GST, now a state with property lying in its territory has the right to
collect the revenues generated in the form of taxes. For example, the UP government will
have them share in the revenue generated as taxes on the property i.e. TheTAJ MAHAL OF
INDIA, located in its territory.
Earlier, the government was charging a local luxury tax on hotels and VAT on the food
served. And the union government was taking all the revenue generated through these taxes.

38
But after the introduction of GST, states are generating their revenues through SGST (State
Goods and Service tax). And it varies as per the number of tourist places, hotels & restaurants
for the tourists, a state has.
The state with the maximum number of outbound journeys will earn the highest revenue. It
means the state having the most of outbound flights; train journey etc. will have generous
revenues.

Facts about World Tourism

1. GDP: Direct Contribution

The direct contribution of Travel & Tourism to GDP was USD2, 570.1bn (3.2% of total
GDP) in 2017, and is forecast to rise by 4.0% in 2018, and to rise by 3.8% pa, from 2018-
2028, to USD3, 890.0bn (3.6% of total GDP) in 2028

2. GDP: Total Contribution

The total contribution of Travel & Tourism to GDP was USD8, 272.3bn (10.4% of GDP) in
2017, and is forecast to rise by 4.0% in 2018, and to rise by 3.8% pa to USD12, 450.1bn
(11.7% of GDP) in 2028.

3. Employment: Direct Contribution

In 2017 Travel & Tourism directly supported 118,454,000 jobs (3.8% of total employment).
This is expected to rise by 2.4% in 2018 and rise by 2.2% pa to 150,139,000 jobs (4.2% of
total employment) in 2028.

4. Employment: Total Contribution

In 2017, the total contribution of Travel & Tourism to employment, including jobs indirectly
supported by the industry, was 9.9% of total employment (313,221,000 jobs). This is
expected to rise by 3.0% in 2018 to 322,666,000 jobs and rise by 2.5% pa to 413,556,000
jobs in 2028 (11.6% of total).

5. Visitor Exports
Visitor exports generated USD1, 494.2bn (6.5% of total exports) in 2017. This is forecast to
grow by 3.9% in 2018, and grow by 4.1% pa, from 2018-2028, to USD2, 311.4bn in 2028
(6.9% of total)

6. Investment
Travel & Tourism investment in 2017 was USD882.4bn, or 4.5% of total investment. It
should rise by 4.8% in 2018, and rise by 4.3% pa over the next ten years to USD1, 408.3bn in
2028 (5.1% of total

39
IMPACT ON CONSUMERS

In Pre GST era, there was a composite levy of both Service tax i.e 6%, as well as, Value
Added Tax i.e 14.5% (Vary from State to State) on food and beverages served by hotels and
restaurants which finally put the burden of 20.5% in the pocket of ultimate consumers.
However, some relief was provided for Non-AC Restaurants supplying food and beverages as
no service tax was levied on these restaurants.

Post GST, the scenario shall be completely different. As discussed above that supply of food
and drinks in a restaurant shall be treated as a supply of services. Hence, only GST shall be
levied on such services at a lower rate which saves substantial amount as compared to the
previous regime. Further, if you are planning to stay in a good hotel, it is going to be very
costlier as the rate of tax has been doubled from 9% to 18%. Even Luxury Hotels of 5 stars or
above-rated charging room rent Rs. 7,500/- or above will attract 28% tax.

40
 CHAPTER 2

LITERATURE REVIEW

What is Literature Review?

A writing survey is a synopsis of recently distributed deals with a specific subject. A whole
insightful paper or a part of an academic work, for example, a book or an article may be
alluded to by the word. Regardless, the objective of a writing survey is to give the
specialist/writer and the crowd an expansive image of why is the current subject known. A
careful writing assessment helps ensure that a real examination subject has been presented
and that the proper hypothetical system and additionally research philosophy has been
chosen. A writing survey, to be exact, expects to put the current work inside the setting of the
pertinent writing and to give the per user setting. In such cases, the survey regularly starts
things out, trailed by the approach and the work's results segments.
A writing survey is a typical part of graduate and post-graduate understudy work, like while
composing a theory, exposition, or diary article. In an examination proposition or outline,
writing audits are likewise average (the archive that is supported before an understudy
officially starts an exposition or postulation)
An audit article can incorporate a writing survey. In this sense, a writing audit is a logical
work that sums up current information on a specific issue, including considerable disclosures
along with hypothetical and strategic commitments. Writing audits are auxiliary sources that
don't cover new or exploratory examination. Such audits are generally normally associated
with scholarly situated writing and can be found in scholastic diaries. They ought not be
mistaken for book surveys, which can likewise be found in a similar magazine. In basically
every scholarly discipline, writing assessments fill in as an establishment for study

41
 Akanksha Khurana (2016) ,
It can be said that GST will provide relief to producers and consumers by providing wide
and comprehensive coverage of input tax credit set-off, service tax set off and subsuming
the several taxes. Efficient formulation of GST will lead to resource and revenue gain for
both Centre and States majorly through widening of tax base and improvement in tax
compliance. It can be further concluded that GST have a positive impact on various
sectors and industry. Although implementation of GST requires concentrated efforts of all
stake holders namely, Central and State Government, trade and industry. Thus, necessary
steps should be taken.

 Amandeep Kaur (2018), present “A Research paper on Impact of GST on Indian

Economy”.
He studied that it is the biggest ever change in tax structure of India. There is a fall in prices
of Auto Commercial Vehicle, Two wheelers, Small cars, essential items, Footwear, Building
Materials etc. and education, healthcare are going to be exempted from GST but on the other
hand, price of some other goods and services increased after GST like Hotel room rental,
Restaurants and fine dining and Branded Apparels.

 Mr. Gajanan dhannu Rathod, Mr. Rakesh Kumar (2018)

Studied “the negative impact of GST on Indian economy”. They find that taxation system is
very important for the economy they maintain equity in income group. In context of India,
second high tax rate in the world and its devastating impact on poor people, consumption and
productions of goods and services are rising and because of multiplicity of taxes in current
tax system, organization complexities and conformity cost is also increasing. At present
Indian economy requires a major change in the taxation system.

 Renuka r (2018)
Present a research article on “impact of GST on tourism and hospitality sector” and found
that tourism industry was suffering severely from multiple taxes. Almost all the industry
players were eying on the GST for some relief. However, the outcome was other way round
for the industry. The optimist from the industry still feels that it would be early to react
negatively. They believe that such negativity will prevail only in the short run and may
change positively in the longer run, once GST get settled in every sector in the economy.
Hence it could be concluded by expecting that it really gives positive impact to the industry
to cheer.

 Faizanbhai (2019)
In his paper entitled “impact of GST on various aspects of restaurant and hotel Business in
Anand and Nadiad district at Gujarat state”, concluded that hotel and restaurant profit
Remains constant even after the implementation of GST. There is a neutral impact on
compliance cost, and negative impact on budget and financial position and requirement of
working capital for hotel Business he felt.

42
  Nitin Kumar (2020)
Made a study on the “customers perception towards goods and service tax (GST) In jind
region of Haryana”. He found that good understanding among customers is important as it
can Generate a positive perception towards the taxation policy. So, the researcher suggested
that the Government has to put in more efforts to ensure that consumers have a clear
understanding and can Develop a positive perception towards GST, leading to its acceptance.

 Akanksha Khurana (2016),

It can be said that GST will Provide relief to producers and consumers by providing wide
and comprehensive coverage of input tax credit set-off, Service tax set off and subsuming
the several taxes. Efficient Formulation of GST will lead to resource and revenue gain for
both Centre and States majorly through widening of tax Base and improvement in tax
compliance. It can be further Concluded that GST have a positive impact on various
Sectors and industry. Although implementation of GST Requires concentrated efforts of
all stake holders namely, Central and State Government, trade and industry. Thus,
Necessary steps should be taken.

 Dr. R. Vasantha Gopal, (2011)

Studied “GST in India: A Big Leap in the Indirect Taxation System”, and found that the
positive impacts are dependent on a neutral and rational Design of the GST, balancing the
conflicting interests of Various stakeholders, full political commitment for a Fundamental tax
reform with a constitutional amendment, The method. Different news articles, Books and
Web were Used which were enumerated and recorded. Switchover to a ‟flawless‟ GST
would be a big leaf ion the indirect taxation System. It is also noted that, buoyed by the
success of GST, more than 140 countries have introduced GST in some form to other and is
fast becoming the preferred form of indirect Tax in the Asia Pacific region. The Honourable
Minister of Finance, Corporate Affairs & Information and Broadcasting, Government of
India further mentioned that the Implementation of the GST will be pegged as one of the
biggest game changing reforms of the Indian government. It Will help India become an
economically integrated economy, Will help reduce business costs and facilitate seamless
Movements of goods and services eliminating local charges. It would reduce tax cascading
eliminating tax on tax and hence help reach a situation where revenue would be Benefited
and GDP would improve.

 Shefali Dan (2016)

The proposed GST regime is a half-Hearted attempt to rationalize indirect tax structure. More
Than 150 countries have implemented GST. The government Of India should study the GST
regime set up by various Countries and also their fallouts before implementing it. At The
same time, the government should make an attempt to Insulate the vast poor population of
India against the likely Inflation due to implementation of GST. No doubt, GST will Simplify
existing indirect tax system and will help to remove Inefficiencies created by the existing
current heterogeneous Taxation system only if there is a clear consensus over issues of
threshold limit, revenue rate, and inclusion of petroleum Products, electricity, liquor and real
estate. Until the Consensus is reached, the government should resist from Implementing such
regim

43
  Japee and Lakhani (2018)
Studied about Goods and Services Tax in India – Paradigm Shift in Taxation. This study
focuses on impact of GST from international perspective. Researcher presented pre and post
GST tax classification and also explained the importance and need of GST in India. This
study also explains the journey of GST that how it came into effect in 2017 and also analysis
of impact of GST on famous sectors of economy has been done. At last researchers concludes
that this tax system will benefit the customers as well as the business houses only when the
entire country works as a whole towards making it successful.

 Saeeda (2019)
Studied about GST: Impact of GST on Various Aspects of Restaurant and Hotel Business in
Anand and Nadiad District. The main aim of the study is to examine the impact of GST on
various aspect of restaurant business in Anand and Nadiad City. For the study purpose,
researcher selected 35 hotels and restaurants from Anand city and 33 hotels and restaurants
from Nadiad city using Convenience Sampling technique. The study is based on primary data
collected using structure questionnaire. Researcher used Pearson Correlation, T-test and
independent sample test for the hypothesis testing. Researcher concluded that effect of GST
on sales and purchase of hotel and restaurants is positive to neutral but the profit remains
constant even after the implementation of GST. Researcher also stated that accounting
procedure and record keeping become easier and production and service cost remains same.

 Subha and Premkumar (2020)

Examined An Empirical Study on Impact of GST on Hotel Industry at Chennai City. This
study aims to find out the influence of GST on Hotel Industry at Chennai city with the help of
five independent variables to identify the opinion of respondents on the implementation of
GST namely GST is effective, easy to understand, taxation condition, profit margin, customer
increase after GST. For study purpose researchers collected data from 50 hotels by using
structured interview method. The sampling technique adopted by researchers was
disproportionate stratified random sampling method. Researchers used descriptive statistics
and multiple regression analysis to analyse data. Researchers examined the pros and cons of
GST with respect to Hotel Industry and also analysed the positive or negative influence of
GST on Hotel Industry at Chennai city. So finally, study concluded that GST in hotel
industry will attract more customers to consume hotel service and also enhance revenues to
the government.

 Jonathan and Gabriel (2017)

Examined the Impact of GST in hotel and restaurants. This study focuses on impact
analysis on the restaurant and food industry. Researchers classified the restaurants on the
basis of the food and services they provide respectively. And accordingly, researchers
examined the before and after GST scenario. Researchers explained how the restaurant
bill will look under GST and what will be the implications for the end customers, the
owners and the overall industry. So finally, researchers concluded that companies
specializing in food and beverages operations could be the biggest beneficiaries of GST
within the hospitality sector. They further added that food and beverages bills have
multiple components and can inflate the bills by 30-35% and a single slab tax will benefit
consumers and should lead to savings of 10-15% on the overall bill.

44
 Abraham and Mathew (2019)
Examined A Study on the Impact of Goods and Services Tax Reform on Hotels in Kerala.
The main aim of the study is to examine the opinion of hoteliers on the implementation of
GST. A questionnaire was designed and administered to 60 hotels with restaurants across the
district of Kottayam for the study using convenience sampling technique. Researchers used
percentages and chi square test to analyse the data. Moreover, researchers also focused to
identify the problems faced by hoteliers on the implementation of GST. This study also
assesses whether there is any increase in the compliance cost on the implementation of GST.
So finally, researchers concluded that majority of the hoteliers have expressed faith in the
system even though the majority of hotels have incurred additional costs in transitioning
towards the new system as it is expected by them that in the long run GST will be proved
beneficial.

 Aswathy et al. (2018)

Focused on A Study on GST and its effect on hotel industry. This study aims to find out the
impact of GST on hotel industry. Researchers classified the GST rates on the basis of room
rent and then accordingly examined the impact of GST as per the rates. This study shows the
impact of GST on hotel sector in terms of reduced tax rate, centralised registration, provision
of GST audit, discount and offers policies of hotels and restaurants should be documented,
effect of inward and outward receipts, no input tax credit on alcohol and electricity as they
are out of the preview of GST and so on. So finally, researchers concluded that companied
that focuses on food and beverages could be the biggest beneficiaries of GST within the
hospitality sector and on the other hand hotels falling under 18-28% GST slab bears the
adverse effect of GST. With those researchers also suggested to reduce the average room
rates which will be beneficial to both hoteliers as well as to the customers.

 Akshay R. Rakhunde, Dr. Priti Rai. (2019)

Examined the influence of GST on hotel industry, Nagpur. The study was chosen 3-star, 4-
star, 5-star hotel in Nagpur. The study found that GST helps in improving the financial
management and minimizes the problem for hotel community leading to cost increase and
free flow of negotiation. The study concluded that maximum hoteliers in Nagpur are
supporting GST.

 Panwar, D & Patra, S. (2019)

Identifies the influence of goods and services tariff on the restaurants and food service trade
in India. The study is exploratory in nature which focuses on analysis of the secondary data
was gathered from the newspapers, magazines and from various websites which have
published and focused on various determinants of Goods and Service tariff and how it
influences the restaurant bills and the marketing factors of these companies/businesses. The
study revealed that with the emerging changes in tax layout, the GST will impact primarily
the promotional strategy of restaurants and food service trades and will give consumers clear
picture of taxes they pay in restaurants. Therefore, restaurants and food service businesses
must draw outline of future in view of evaluation of GST and its impact on their businesses
and functions mandatorily.

45
 Aswathy Krishna & Divya. M.S, Aashish C.I (2018)
Assessed the influence of GST on hotel industry. The study found that after implementation
of GST, the budget hotels are the most benefitted one. It also found that the hotels falling
under 18-28% GST slab bears the adverse effects of GST. The study concluded that GST
removes the problems faced by the hotel sector leading to cost optimization and free flow of
transactions.

 Times of India (27 July 2017)

Stated that the GST implication across different places for the same product has wider
differences which the consumers are unaware, resulting them in surprise. Ex A Rasamalai
sold in counter at a shop is taxed with 5% but if it is served in the hotel it is taxed with 18%
this has resulted indifference of consumers shopping to purchase the similar product.

 Jonathan and et. Al (2017)

“Impact of GST in hotel and restaurants”. The objective of the study is to how the restaurant
bill will look under GST, and what are the implications for the end consumers for the owner
and the overall industry. The findings revealed that hotels are liable for GST of 28% (14%
CGST+14% SGST) as against the effective tax of 21%under present indirect tax regime.

 Alka Shah (2nd Nov 2017)

“Integrated Goods and services tax an Indian innovation”. The objective of the study is to
cross utilisation of credit is to be done and adjustments to be made between centre and states.
The paper mainly focuses on the key provisions for determining place of supply of
Goods/services and nature of supply i.e., interstate or intra -state.

 Poonam (2017)
The biggest problems in Indian tax system like Cascading effect & tax evasion, distortion can
be minimized by implementing GST. After amalgamation of local state and central taxes
competitiveness of industry, exporter and company will increase. The extra revenue which
can be generated from broaden tax base structure can be utilized for the growth of nation. In
economy tax polices play an important role because of their impact on efficiency and equity.
Indirect tax reforms have been as integral part of the liberalization process since new
economic reforms.

46
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 MEANING :

Research methodology is defined as a systematic way to solve a research problem by

collecting data using various techniques, providing an interpretation of the collected data, and
drawing conclusions about the research data. A research method is fundamentally the
blueprint of the research or study. Research methodology is way to systematically solve the
research problem. It may be understood as a science of studying now research is done
systematically. In that various steps, those are generally adopted by a researcher in studying
his problem along with the logic behind them.

Data collection is important step in any project and success of any project will be largely
depend upon now much accurate you will be able to collect and how much time, money and
effort will be required to collect that necessary data, this is also important step.
Data collection plays an important role in research work. Without proper data available for
analysis, you cannot do the research work accurately. It is important for researcher to know
not only the research method but also know methodology. The procedures by which
researcher go about their work of describing, explaining and predicting phenomenon are
called methodology. Methods comprise the procedures used for generating, collecting and
evaluating data. All this means that it is necessary for the researcher to design his
methodology for his problem as the same may differ from problem to problem.

47
3.2 TYPES OF DATA COLLECTION

Data collection is a process of collecting information from all the relevant sources to find
answers to the research problem, test the hypothesis and evaluate the outcomes. Data
collection methods can be divided into two categories: secondary methods of data collection
and primary methods of data collection.

Project is mainly based on secondary data.

 PRIMARY DATA

Primary data are the data which are accumulated from the field under the control and
superintendence of an investigator. Primary data means original data that have been collected
specially for the purpose in the mind. This type of data is generally a fresh and collected for
the first time. It is useful for current studies as well as for further studies. The collection data
tool that has been chosen in this study is questionnaire. Most of the previous researcher use
the questionnaire as their data collection tool in the survey. For example, when doing a
market survey, the goal of the survey and the sample population need to be identified first.
This is what will determine what data collection source will be most suitable—an offline
survey will be more suitable for a population living in remote areas without internet
connection compared to online surveys.

 SECONDARY DATA

Secondary data are the data collected by a party not related to the research study but collected
these data for some other purpose and at different time in the past. If the researcher uses these
data, then these become secondary data for the current users. These may be available in
written, typed or in electronic forms. A variety of secondary information sources is available
to the researcher gathering data on an industry, potential product applications and the
marketplace. Secondary data is also used to gain initial insight into the research problem.
Secondary data is classified in terms of its source – either internal or external. Internal, or in-
house data, is secondary information acquired within the organization where research is being
carried out. External secondary data is obtained from outside sources. There are various
advantages and disadvantages of using secondary data.

48
Advantages of Secondary Data:

Advantages of secondary data are following:

 The primary advantage of secondary data is that it is cheaper and faster to access.
 it provides a way to access the work of the best scholars all over the world.
 secondary data gives a frame of mind to the researcher that in which direction he/she
should go for the specific research.
 secondary data save time, efforts and money and add to the value of the research
study.

Disadvantages of Secondary data:

Following are the disadvantage of secondary data:

 The data collected by the third party may not be a reliable party, so the reliability and
accuracy of data go down.
 Data collected in one location may not be suitable for the other one due variable
environmental facto
 With the passage of time the data becomes obsolete and very old
 Secondary data collected can distort the results of the research. For using secondary
data a special care is required to amend or modify for use.
 Secondary data can also raise issues of authenticity and copyright.

Keeping in view the advantages and disadvantages of sources of data requirement of the
research study and time factor, both sources of data i.e., primary and secondary data have
been selected. These are used in combination to give proper coverage to the topic

49
3.3 OBJECTIVE

The study based on the following objectives:

 The present study on GST focuses on the service sector particularly the hotel industry.

 To study tax structure implied before the introduction of GST on hospitality industry

 To study the GST levied on hotel industry particularly in a 3-star Hotel Arya Niwas

 To study and find out the GST impact on customers.

 To study the financial statement of the hotel before and after GST.

 To study the need for GST in India.

 To study the positive and negative impact of GST on the hospitality sector

 The overall objective of the study is to evaluate the impact of GST on travel and
tourism industry.

 To evaluate the customer satisfaction by observing the impact on customers buying

behaviour.

 This study also aims to analyse the relationship between clarity of customers
regarding GST and issues faced by hotelier/ agents while handling their customers.

 To evaluate the effect of pre and post GST impacts on Tourism and Hospitality
industries in India.

50
3.4 SCOPE OF STUDY

This Study has enhanced our knowledge database about the Taxation system and working of
the hospitality and travel and tourism industry. It has provided us with some of the online
data companies as we were able to analyse the sum total of the data representation. We could
find that it had little impact on the hospitality industry after GST implementation and also
travel industry, there is a cut-throat competition existing in the hotel and travel industry and
only survival of the fittest is possible. In the both industry, a customer-centric approach is
followed wherein the customer is of prime importance and also travel agent and Travel
Company important.

3.5 RESEARCH DESIGN

The present research paper is a study of “Impact of GST on Hospitality and Travel, Tourism
industry” based on secondary data collected from the published research paper, articles,
journals, newspapers and websites.

3.6 LIMITATION OF THE STUDY

Following limitation were encountered while preparing this project :

 LIMITED DATA :
This project has completed with before and after GST; it just constitutes one part of
data collection i.e. secondary. There were limitation for primary data because of
difficult to reach towards to travel agency

 LIMITED PERIOD :
This project is based on before GST and after GST.

 LIMITED AREA :
Also, it was difficult to collect the data regarding the travel agents and their travellers
customers and also its was vast area to collect the particular data . Hotels industry
were also difficult to get.

51
 CHAPTER 4

DATA ANALYSIS

The most common way of breaking down, purifying, controlling, and demonstrating
information with the target of recognizing usable data, illuminating ends, and helping
direction is known as information investigation. Information investigation has a few aspects
and approaches, including a wide scope of strategies under different titles and being applied
in an assortment of business, science, and sociology areas. Information examination is
significant in the present business climate since it assists organizations with settling on more
logical choices and run all the more proficiently. Information mining is a sort of information
examination that spotlights on measurable demonstrating and information revelation for
prescient rather than simply clear purposes, while business knowledge is a kind of
information investigation that intensely depends on collection and is basically worried about
business information. Information examination can be isolated into graphic insights,
exploratory information investigation (EDA), and exploratory information examination
(EDA) in measurable applications. Analysis of extra information (CDA) EDA is worried
about tracking down new elements in information, though CDA is worried about approving
or disproving current suppositions. Text investigation utilizes measurable, semantic, and
primary strategies to separate and group data from text based sources, a kind of unstructured
information. Prescient investigation centres around the use of factual models for prescient
determining or grouping, though prescient examination centres around the utilization of
measurable models for prescient gauging or arrangement. All of the previously mentioned are
instances of information analysis. Data joining is an essential for information examination,
which is thus connected to information perception and conveyance.

52
Table No. : 01

Analysis of GST on Different type of hotels

3 Star Hotel Topic Favour in GST Against GST Neutral

GST is effective 60% 40% 0%

Rate of Food in Hotel 50% 20% 30%

Customer increase after 40% 30% 30%

GST
Taxation Condition 50% 30% 10%

Rate of Hotel room 80% 10% 10%

Profit Margin 60% 40% 0%

Easy to understand 50% 20% 30%

Customer Reaction 80% 10% 10%

4 Star Hotel Topic Favour in GST Against GST Neutral

GST is effective 60% 40% 0%

Rate of Food in Hotel 70% 20% 10%

Customer increase after 50% 30% 20%

GST
Taxation Condition 60% 20% 20%

Rate of Hotel room 80% 10% 10%

Profit Margin 50% 40% 10%

Easy to understand 50% 30% 20%

Customer Reaction 70% 10% 20%
5 Star Hotel Topic Favour in GST Against GST Neutral
GST is effective 60% 40% 0%
Rate of Food in Hotel 40% 40% 20%
Customer increase after 60% 10% 30%
GST

53
Taxation Condition 60% 30% 10%
Rate of Hotel room 40% 50% 10%
Profit Margin 80% 10% 10%
Easy to understand 50% 40% 10%
Customer Reaction 60% 10% 30%

Source : collected from the different published sources

GST will subsume the service tax and VAT into one single rate but eateries bills are expected
to incorporate service charges along side GST. The GST council has introduced rates apply
for various sort of restaurant. Eating at a Non- AC restaurant not serving alcohol are going to
be charged at 5% GST . Apart from it all restaurant whether it be partly air condition and
partly non air conditioned serving alcohol or not, completely air conditioned serving alcohol
or not , including eating at luxury and five star hotels will are going to charged GST at 5%
Food Truck businesses will not be affect by the implementation of the GST so therefore its
expected that such eateries will grow drastically

within the near future. Customers eating at various restaurants hardly concentrate to the
components of taxes included in their food bills. Pre GST food bills wont to incorporate
service charges, service tax and value added tax

The tourism is one of the sectors in the economy that is deliberately over the new regime.
Hospitality is one of the most competitive and steadily growing industries in the country.
Hospitality and Tourism are also among the highest employment generating sector and
among the top ten sectors in the country with the highest volume of foreign direct investment.
In addition to being one of the top sources of foreign exchange, tourism is also among the
higher tax generating sectors in the country. One such service which is extensively used is
one of the booming sectors of the Indian economy is travel industry. GST on Travel and
Tourism industry is Disappointing. The industry believes that the higher tax slabs will impact
and higher growth, putting pressure on the bottom line and squeezing the margins of the
players.

54
In India, the travel and tourism industry is one of the major contributors in country’s
economic growth and is expected to reach Rs. 2796.9 thousand crores by 2022. To reach this
amount by 2022 hospitality industry’s expectation from the government was more because
28% GST on hotels over Rs.5000 or above is a matter of concern for the industry, it should
not be more than 18% to survive in the international market. In Pre GST era, there was a
composite levy of both service tax 6%,as well as, Value Added Tax 14.5%, which inflate the
bills by 30-35%. It is expected that GST to result in savings of 10-15% on the overall bill.
Table No. : 02
GST on Airfares
Economy class Fare Under Service Economy class Fare Under GST Regime
Fare / Charge Amount Fare / Charge Amount
Base Fare 2000 Base Fare 2000
Airline Fuel Charge 700 Airline Fuel Charge 700
Cute Charge 50 Cute Charge 50
Tax and other charge - Tax and other charge -
Passenger service charge 239 Passenger service charge 239
Ser Development fee 150 Ser Development fee 150
Airline Service tax @5.6% 154 Airline Service tax @5% 137.5
Other surcharge 12 Other surcharge 12
Total fare 3305 Total fare 3228.5

( source : www. Hellotravel. Com )

The cost of travel for economy class passengers is likely to be remaining same. Economy
class air travel will become cheaper with the tax rate 5% against the existing 6% under the
GST regime. But the travelling business class ticket will become dearer as the tax will go up
from 9% to 12%, which will affect the airline industry. Due to competitive scenario, the
airlines are not expected to implement the tax burden to passenger as it might affect the
airlines occupancy rate.

The positive impact of GST is that the multiple taxes would be replaced by one single tax, the
rate of which is likely to be between 16%-18%. The sector may benefit in the form of lower
tax rates which should help in attracting more tourist in India. In the case of passenger
travelling, the state with the maximum outbound journey shall earn the highest revenue so the
station or the port having highest outbound flights, train journey or local cab journey shall
earn substantial revenue. Under GST, goods and services fall under five tax categories very
difficult to understand for the common man. GST positive aspect is one indirect tax for the
whole nation, which will make India into a unified common market.

55
On the other hand the negative impact of GST is that inflation rate has increased from 1.79%
to 5.11% during the period July 2017 to January 2018. The negative impact of GST on price
levels in India, it has largely affected consumption and demand of poor people in India.
India’s economic growth was 8.4% in March 2015 which fell to 5.7% in July 2017,
bottoming out from the impact of demonetization and GST, The negative impact of GST is
evidently visible on the Indian Economy. The proposed GST may lead to increase the price of
essential products leading to low consumption. The implementation of GST (July 2017)
increased the unemployment rate (3.39 to 6.06%) during period July 2017 to February 2018
in India. It means negative impact of GST in rampant on employment rate.

Table No. : 03

Impact analysis of GST on Hospitality Industry :

Particular Before GST After GST

Tariff 100 1500 5000 8000 1000 1500 5000 8000
0
Luxury Tax 40 120 600 960 NA NA NA NA
Service Tax 0 126 420 672 NA NA NA NA
Swach Bharat Cess 3.0 4.50 15.00 24.00 NA NA NA NA
Krishi Kalyan Cess 3.0 4.50 15.00 24.00 NA NA NA NA
GST NA NA NA NA NO TAX 180 900 2240
Total 104 1755 6050 9680 1000 1680 5900 10240
6
(Source : General Effect of GST in Hospitality and Tourism Industry)

Swachh Bharat Cess & Krishi Kalyan cess = 0.5% on 60% of Tariff. Note: Services like
Complimentary breakfast which was taxed separately under the VAT regime will be taxed as
a bundled service under GST

Table No : 04
GST Rates on Eating Out
Restaurant Type Service Tax VAT Serving / Not GST
Serving Alcohol RATE
Non – Air Not Serving Alcohol 5%
conditioned Not Serving Alcohol 5%
Air Conditioned 6% (60% Abatement, pay Serving Alcohol 5%
only 40% ) 14.50
Not Serving Alcohol 5%
%
Partly AC & Partly Serving Alcohol 5%
Non-AC Not Serving Alcohol 5%

56
5 Star Restaurant Serving Alcohol 5%

All 5%
(Source: www. Gstcouncil .gov. in )

The GST council has introduced rates applicable for various types of restaurants. Eating at a
Non-AC restaurant not serving alcohol will be charged at 5% GST. Apart from it all
restaurants, whether it be partly Air conditioned and partly non-Air conditioned, serving
alcohol or not, completely Air conditioned, serving alcohol or not, including eating at luxury
and five-star hotels will be charged GST at 5%. Food Truck businesses will not be affected
by the implementation of the GST. Therefore, it is expected that such cateres will grow
drastically in the near future.
Table No : 05

Impact of GST on Restaurant Owner’s Purchase Bill

S. Particular Billing under VAT Regime Billing under GST Regime
No
1 Wheat 1200 1200
2 Spices 400 400
3 Oil 200 200
4 Total 1800 1800
5 VAT @ 5% 90 -
6 GST @ 5% - 90
(Source : www. Gst council . Gov.in )
From the above table 5 it is clear that under the VAT regime the Restaurant Owner’s were
paying more tax to the authorities as compared to the GST regime. Thus, GST has helped
enhancing their working capital.

Table No : 06
Impact of GST on Cabs before and after

Particulars Before GST After GST

Basic fare 500 500
Access charge 70 70
Total Fare 570 570
Service tax @ 34.20
6%
GST @ 5% - 28.50
Total to pay 604.20 598.50

57
(Source : www. cleartax . Gov.in )
From the survey it is found that there is a decrease the cab fares. The benefits have been
passed on to the passengers in the form of discounts and special pricing

 Hotel received benefits after GST application

Interpretation:
50% of owners said that their restaurant received benefit after applying GST, rest 30% of
restaurant said that their restaurant are not received any benefits and remaining 20% said their
restaurant may be received benefits after applying GST

 You have stress because of applying GST

58
Interpretation:
 44% of owners had stress because of applying GST, 16% of owners not have stress
because of GST , rest 32% of owners may be have stress and remaining 8% can’t say
anything about that.

 Easier administration and procedures

81% of the sample population believes that subsuming multiple taxes under a single category,
GST will abolish the tax-on-tax structure which will reduce the complexity of taxation
procedures and streamline it

 Greater technological burden

59
From the survey it is found that 89% of respondents feel that, there are a few cons that are
hard to overlook. One of them is increased burden on service providers to employ
technology-based tools for taxation procedures. While the guidelines on managing accounts
and filing returns are welldefined, it will require businesses to become technologically adept,
increasing the burden and cost of compliance.

 Increased Costs

Looking at the response, it can be said that almost every believes that businesses will
increasingly look to recover the additional technology costs from their customers, which may
lead to higher tariffs

60
  Lack of competitiveness with other Asian countries

92% of respondents feel that while GST is making India a bigger player in the global
hospitality and tourism industry, there is no global competitiveness in tax rates. Other Asian
countries such as Japan and Singapore have much lower tax rates in the hospitality sector
(8% and 7% respectively) which is amongst the top reasons why tourists prefer to visit these
countries and others such as Malaysia, Thailand, etc. While the sector remains divided on the
predicted impact of Goods and Services Tax, most players in the industry have welcomed the
move to the new tax regime with great enthusiasm. The long-term impact, however, remains
to be seen and only time will tell how and if GST does accelerate growth in the sector

(Source : International journal of science and research )

CHAPTER 5
CONCLUSION AND SUGGESTIONS

Conclusion :

It can be concluded that the introduction of GST is a major step taken by the Government of
India. The hospitality industry is a versatile field encompassing accommodation and
entertainment service, accounting, food and beverage, event management and above all guest
satisfaction.

61
GST is a mixed bag of better and easier rules and regulations, increased costs and
compliances. The Hotel and Restaurant Association of India had been eyeing for a GST rate
of 5% as it believed that a lower rate will bring in more tourists and allow Indian businesses
to compete with global chains. However, the GST Council deemed it fit to set the rate at
18%. The Tourism and Hospitality industry in India is expected to grow to US$ 280.5 billion
by 2026, and the initial hiccups after GST implementation are highly unlikely to hinder this
growth. However, it remains to be seen whether the cons outweigh the pros for this sector.
The GST for tour packages, both domestic and international, has seen a very little increase
from 4.5 per cent to five per cent, and as such we do not impact demand for holidays; in fact ,
this is as a positive response by consumers as it compares extremely favorable against the pre
service tax which saw a doubling of the rate from 4.5 per cent to nine per cent. Again, the
increase from 1.5 per cent to 1.8 per cent on international air tickets is marginal which do not
foresee any impact; and this applies to domestic air tickets too with a change from 0.75 per
cent to 0.9 per cent "While we applaud the government's effort to keep GST at 5 per cent for
restaurants below 50 lacs and 12 per cent for restaurants without AC.

We are 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", National Restaurant Association of India (NRAI) President Riyaaz Amlani said.
Well, there is an extensive impact of GST on the tourism industry. However, the people
engaged in tourism require to be highly updated with the latest reforms in the GST regime.
The introduction of GST in the form of SGST and CGST has given a say to both the
government pertaining to the revenue generated in the form of tax.
However, better utilization of Input tax credit is still expected and the rates should be revised
to give a push and encouragement to the Tourism Industry.It leads to the optimization of cost

and betterment of the flow of the transaction. GST will definitely bring in the positive picture
in the long run. Our Government of India has also been making amendments on the areas that
need to be worked upon. The new taxation systems have given a boost to the tour and travel
industry as well as the whole hospitality industry. Moreover, the GST has reduced the
complexities of the previous tax laws which had taxes at different levels.
GST is a hope for the tour and travel industry if we manage to keep GST rate between 9% to
18%. At last, it is evident that the benefits of GST have overpowered the demerits of the GST
tax system.
Thus, finally, we can say that the Hotel sector is always a priority by Govt. Hotel industry
including tourism contributes 6.23% of national GDP and 8.78% of total employment in the
country. This industry definitely helps in building the nation and is going beyond the
borders.

62
Suggestion :

• There should be a smooth, transparent and simple transition provisions which are easily
understandable.

63
• Special focus on awareness and training of all assessee, professionals, and employees
should be given on GST.
• Since the public is very clear about GST, any disputes on GST introduction should be
protectively addressed by way of speedy redress.
• The people are not well informed on the implementation of the GST. In order to ensure
efficient implementation of the GST, the government should issue a proper guideline to the
society on the procedures for the implementations of GST.
• More departments should be established for removing Tax fraud and corruptions benefit
both customers and the Government.
• The relevant authorities especially the customer's department must work closely with other
departments like information, Inland Revenue, and other enforcement authority ensure good
implementation.

•Customer-slab rate policy have to take initiative by the government of India to cut the
income level differences among the low middle-class and low income group.

• As the hotels comprising of Non A/c compartments, the hotel have to fix a moderate rate of
GST as it suits the income needs of low-middle class and low income people

• The Allowances on GST rates in small-sized and moderate hotels as it encourages the low-
income and middle class people. In point of GST in hotel, especially for the alcoholic
products like liquor should be taxed at the highest slab rate compared to the current 18% GST
rate on A/c restaurants

• It has also suggested that hotels should be allowed to charge IGST which will enable
seamless availability of credit across India to all travel agents and tour operators. It will lead
to building up a sustainable domestic holidays, meetings and conventions business within the
country.

• Lastly, the government must ensure good management of the income collected from the
GST.

64
 WEBLIOGRAPHY

www.academia.edu
https://www.moneycontrol.com/news
https://taxguru.in/goods-and-service-tax
https://corpbiz.io/learning/impact-of-gst-on-tourism-industry
www.slideshare.net/travel and tourism
https://ijcrt.org/papers
www.cleartax.in/gst on hospitality industry
www.cleartax.in/ impact on cabs

65
www.indiafillings.com

66