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TOs Approach FM For Service Tax
Seek 90 Per Cent Abatement
Jyoti Koul, - New Delhi
Close on the heels of domestic tour operators are inbound tour operators who
have approached the Ministry of Finance to resolve the service tax issue. On
behalf of the inbound tour operators, the Indian Association of Tour Operators
(IATO) recently initiated dialogue with the Abatement Committee.
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Frequent and abrupt changes in tax
structure send wrong signals to foreign agents and make India an unpredictable
and unreliable destination
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It is interesting to note that till March 14 2005, the service
tax on foreign exchange earnings by tour operators was exempted. But with the
withdrawal of notification No. 21/2003 under notification No. 10/2005 and the
introduction of a new set of rules in 2005 by the Finance Ministry vide under
their notification No. 9/2005, this exemption had been withdrawn.
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Major Murli Dhar
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As per the report (and appeal) submitted by the association
to the Abatement committee recently, India is clearly a high-cost destination
since the state and central governments charge various taxes that constitute
around 30 to 40 per cent of the total package cost. According to Major Murli
Dhar, senior vice president of IATO, frequent and abrupt changes in tax
structure send wrong signals to the foreign agents and make India an unpredictable
and an unreliable destination. "We are requesting both the governments
to evolve a rational tax regime that would yield revenue but not kill the tourist,"
Dhar said. The association is demanding that tourism be treated at par with
other service sectors.
The sole point of contention and the reason why they approached the Abatement
Committee is that if a tour operator sells only a hotel room, constituting 80
to 85 per cent of the total package cost, he pays a service tax of 1.02 per
cent.
On the other hand, if he combines the service of the hotel room even with the
air ticket or transport service or a lunch, he has to pay a service tax of 4.08
per cent on the total package. This makes the package more expensive and less
competitive.
"Therefore," Dhar says, "We think that the levy of service tax
on the entire package is not justified and will have a damaging effect on Indian
tourism. An abatement of 90 per cent should be given on the total package cost
and service tax should be charged only on 10 per cent of the total package."
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