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India is currently the second-largest <a href="http://www.businessinsider.in/searchresult.cms?query=telecom">telecommunications</a> market in the world. The large scale influx of Chinese <a href="http://www.businessinsider.in/searchresult.cms?query=smartphone">smartphone</a> makers offering affordable <a href="http://www.businessinsider.in/searchresult.cms?query=smartphone">smartphones</a> have ensured consistent growth in the sector. The government has also been pushing constructive reforms in the sector. 
 
The <a href="http://www.businessinsider.in/searchresult.cms?query=GST">GST</a> is away. That aside, here are the 3 key concerns the <a href="http://www.businessinsider.in/searchresult.cms?query=telecom+industry">telecom industry</a> has for the upcoming <a href="http://www.businessinsider.in/searchresult.cms?query=Budget+2016">Budget 2016</a>. 
 
1. <keyword id="195407" type="UNKNOWN" weightage="100" keywordseo="Cenvat-credit">CENVAT Credit</keyword> Scheme: <a href="http://www.businessinsider.in/searchresult.cms?query=CENVAT+Credit">CENVAT Credit</a> is a credit for central excise on inputs purchased for the manufacture or duty paid in relation to the manufacture of the final product. CENVAT credit is also available for duty paid on capital goods. This includes machinery, plant, spare parts of machinery etc. 
 
Imagine <a href="http://www.businessinsider.in/searchresult.cms?query=CENVAT+Credit">CENVAT Credit</a> like a credit balance in bank account that can be adjusted towards the excise duty payable. There are disputes over availability of credits on passive infrastructure. The industry demands steps to rationalize and broad-base input credit scheme to make indigenous services competitive against imports. Restricted credits on <a href="http://www.businessinsider.in/searchresult.cms?query=Swachh+Bharat+Cess">Swachh Bharat Cess</a> are also inflating output costs. That needs to be taken care of. 
 
2. Education Cess credit: Use of input credit in Education Cess (EC) and Secondary and Higher Education Cess (SHEC) has been restricted to limited cases. The industry wants the government to allow them to use their entire EC/SHEC balance. 
 
3. Clarity: The sector would also love some clarity on tax implications linked to big telecom payments. These include clarifying dispute related to discounts, tax deductibility of spectrum payments, withholding tax implications on <a href="http://www.businessinsider.in/searchresult.cms?query=telecom+infrastructure">telecom infrastructure</a> services and so on.

Budget
2016 – Here’s what India’s Telecom Sector wants urgently

New Delhi, Mar 12 () GST rates on mobile phones, fertilisers, man-made fabrics and garments are likely to be hiked to 18 per cent in the next GST Council meeting on March 14. Experts said the rate hike would improve working capital position of the manufactures as it would correct the inverted duty structure but may lead to increase in price of the finished goods. Currently, under the goods and services tax (GST), certain manufactured goods attract a tax rate of 5 per cent or 12 per cent while their inputs, input services and capital goods attract GST at the higher rate of 18 per cent or 28 per cent. The manufacturers have to claim a refund of accumulated input tax credit (ITC) where the tax rate on input is higher than the finished goods. According to sources, the refund claimed on account of inverted rate structure is about Rs 20,000 crore per year and there is a need to correct this anomaly. Significant items in inverted rate structure are fertilisers, mobiles, footwears, man-made yarns and fabrics, renewable energy devices, and tractors. A number of other smaller items like utensils also attract inverted duty structure. "The GST Council will take up in phases the correction of inverted duty on items as per the recommendation of the officers' committee. On Saturday, 4 items -- mobiles, fertiliser, footwear and man-made fibre, fabric and garments -- would come up for correction," the official said. Currently, cellphones attract a GST rate of 12 per cent, while its inputs are taxed at 18 per cent. "There is hardly any justification for retaining mobile at the slab rate of 12 per cent, while many items like TV, torches, geyser, iron, heaters, mixer, juicers, etc, attract GST at a higher rate," the official added. In the pre-GST era, under the dual excise scheme, a manufacturer had two options for excise duty -- basic excise duty (BED) at 2 per cent or 1 per cent without CENVAT Credit, and BED at 12.5 per cent with CENVAT credit. Imported mobile phones were being subjected to additional duty of customs (equal to higher of the BED) at 12.5 per cent. In central excise, there was no provision for refund of input tax credit on account of inverted duty structure. While fertiliser was originally placed in 12 per cent slab, the Council later lowered the rate to 5 per cent. A total of Rs 6,000 crore have been claimed as input tax credit refund on fertilisers from July 2017 till date. Fertiliser manufacturers have been claiming lower rate on other inputs like ammonia and sulphur. Besides, 18 per cent rate on services and capital goods adds to duty inversion, the official added. The total pre-GST tax incidence, including central excise, tax on inputs, average VAT, CST and octroi, on fertilisers was estimated to be about 9.75 per cent. Besides, the duty inversion in man-made fibre (MMF) value chain has led to a total refund claim of about Rs 1,600 crore so far on man-made yarn and another Rs 2,300 crore on fabrics and other textile items. The MMF value chain such as polyester, acrylic and viscose has unlike GST rate structure. While fibre attracts GST at the rate of 18 per cent, their value-add products, namely yarns, attract GST at the rate of 12 per cent. Thus, there exists an inversion at fibre to yarn stage. Fabrics, however, attract GST at the rate of 5 per cent. The textiles sector currently has a differential GST rate of 5, 12 and 18 per cent. This leads to difficulty in issuing and claiming of refunds. With regard to footwear, the Council in June last year had lowered GST rate to 5 per cent on items worth up to Rs 1,000, while those above this value attract 18 per cent duty. However, inputs used by the sector attract GST rate in the range of 5-18 per cent. EY Tax Partner Abhishek Jain said, "An increase in the rate of GST for some of these products should help liquidating the accumulated credits and thereby bettering the working capital costs for businesses manufacturing these goods. However, the rate increase on these goods may result in price hike and, thereby, may impact demand of these goods." AMRG &amp; Associates Senior Partner Rajat Mohan said, "Economy is going through a rough patch and any further increase in tax rates would run negative sentiment throughout the entire sector and push the demands further down deteriorating the overall economic stability in the country." JD HRS

GST on cellphones, fertiliser, man-made fabric, garments may be hiked to 18 pc

<keyword id="2549811" type="UNKNOWN" weightage="20" keywordseo="Budget-2015">Budget 2015</keyword> has laid out a message of implementation by bringing in a slew of reforms to kickstart India's economic growth and move towards a non-adversarial tax system. Given the same, proposals in Budget 2015 may best be described as ‘pro-growth’. Some of the noteworthy measures from an <keyword id="6354678" type="PERSON" weightage="20" keywordseo="Indirect-tax">Indirect tax</keyword> perspective are listed below. 
 
Hits of Budget 2015 
 · Goods and <keyword id="6355686" type="COMPANY" weightage="20" keywordseo="Service-tax">Service tax</keyword> (‘<keyword id="6354679" type="ORGANIZATION" weightage="20" keywordseo="GST">GST</keyword>’) is expected to play a transformative role in the way the <keyword id="6356076" type="UNKNOWN" weightage="20" keywordseo="indian-economy">Indian economy</keyword> functions. GST will add buoyancy to the economy by reducing the cascading effect on the cost of goods and services. The budget has re-affirmed the Government’s intent in moving towards implementing a GST regime in India from April 1, 2016. 
 
· In Budget 2014, the scheme of Advance Ruling was extended to Resident Private Limited Companies. The budget further extends this benefit to resident firms (i.e. partnership firms, sole proprietors and one person company). This would go a long way in reducing unnecessary litigation for businesses. 
 
· Although the effective rate of customs duty has been increased from 28.85% to 29.44%, proposals have been made for rationalization of the inverted duty structure in line with the agreement of the Government with the World Trade Organisation. For the Information Technology industry, the budget has brought in goods news with the abolition of Special Additional Duty in lieu of VAT on all goods (except populated printed circuit boards) for manufacture of ITA bound items. 
 
· Penalty provisions have been rationalized across the Customs, Excise and Service tax; thereby, reducing penalties on bonafide errors and making them more stringent in cases of tax evasion. The same may help in reducing litigation. 
 
· Cenvat credit of service tax paid under a partial reverse charge may now be taken on payment of service tax. This would reduce the time lag in availment of Cenvat credit as credit availment need not be delayed till payment of invoice value. 
 
· The increase in the time limit for availing Cenvat credit from 6 months to 1 year is a welcome step. This would ensure there is no credit leakage on account of delay in availing credit. 
 
Misses of the Budget 2015 
Although the Finance Minister managed to please the industry in certain sector, there were certain misses as well, such as: 
 · The <keyword id="6360189" type="COMPANY" weightage="20" keywordseo="Union-Budget">Union Budget</keyword> 2014 (w.e.f October 1, 2014) has substantially increased the <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword> for delay in payment of service tax (for a delay for a period beyond 6 months and upto 1 year) to 24% and to 30% (for a period beyond 1 year). Much was expected that Finance Minister in present Budget would consider lowering such penal interest rates so as to reduce the cost burden on an assessee. However, no announcements have been made in this regard by the Finance Minister. 
 
· Double taxation of certain transactions like taxation of intellectual property rights, supply of software, works contracts, etc. have been plaguing the industry for long. The Budget has failed to provide any clarity in this regard. 
· Further, it was also expected to clarify the position regarding levy of service tax on amount recovered by employer from employee during the course of employment. 
 
· The industry was widely expecting that given the time consuming process for obtaining refunds, specific guidelines would be issued by the Government for procuring of refund claim within specific time frame. However, no guidelines have been issued in this regard in the budget. 
 
· Last but not the least, the media industry was hoping for a slew of reforms and the same may be a matter of discussion at the macro level within the corridors of power. However, not much was done. The industry is now hoping for measures at a micro-level for the common man to cherish with family. 
 
Broadly the regulatory measures along-with issues of inverted duty structure, time limit of availing credit etc. are steps in the right direction. A favorable amendment in form of reduction in penalties to encourage compliance and early dispute resolution are measures and signals to facilitate ease of doing business in India. 
 
(About the author: This article has been contributed by Nitish Sharma, Executive Director and Tanushree Roy, Manager, Nangia &amp; Co.)

Indirect Tax: Hits and misses of Budget 2015

The passage of <keyword id="6359833" type="ORGANIZATION" weightage="100" keywordseo="Goods-and-Services-Tax">Goods and Services Tax</keyword> (<keyword id="6354679" type="ORGANIZATION" weightage="100" keywordseo="GST">GST</keyword>) bill in the <a href="http://www.businessinsider.in/Breaking-News-Parliament-clears-Indias-biggest-tax-reform-since-Independence-GST-finally-a-reality/articleshow/53528473.cms">upper house of Parliament </a>has brought a cheer to many industries. However, airlines in the country are afraid that their costs will rise because of this tax, which would eventually lead to higher ticket prices, impacting customers’ pockets and airlines’ cash flow. 
 
The bill will bring in the single-<a href="http://www.businessinsider.in/India-Inc-says-GST-bill-is-biggest-milestone-after-1991-Economic-Reforms/articleshow/53535742.cms">biggest tax reform </a>that India has seen since 1947, replacing various tax structures and following the principle of one country, one tax. 
 
Also read: <a href="http://www.businessinsider.in/GST-can-be-implemented-anytime-in-FY18/articleshow/53537039.cms">Roll out GST anytime in FY18 if April 1 deadline is missed, say experts</a> 
 
Senior executives and industry experts have told ET that air travel would likely have a double negative impact on air travel. While it will make tickets expensive since GST on tickets is higher than the current service tax, jet fuel is also not covered under GST, meaning that airlines will not be able to claim credit on the tax they pay on the fuel. 
 
Also read: <a href="http://www.businessinsider.in/Government-wants-to-make-sure-GST-benefits-reach-consumers-may-discuss-anti-profiteering-clause/articleshow/53554652.cms">Government wants to make sure GST benefits reach consumers, may discuss anti-profiteering clause</a> 
 
"While GST is going to be extremely helpful to the manufacturing sector, there are certain difficulties in store for the services sector, including airlines," the finance chief of an Indian carrier told ET requesting anonymity. 
 
The estimated normal GST is pegged at 17 to 19%; while on some 'demeritted' goods like luxury cars, it will be 40%. Concessional goods and services will have it at 12%. 
 
Also read: <a href="http://www.businessinsider.in/GST-Council-to-walk-a-tightrope-while-deciding-GST-rate-between-18-20/articleshow/53535604.cms">GST Council to walk a tightrope while deciding GST rate between 18-20%</a> 
 
The airlines sector is most probably going to come under the 17%-19% bracket, as against the 6%-9% bracket that it has currently. This will be making ticket prices cost more by up to Rs 400. 
 
Talking of the aviation turbine fuel, airlines claim a cenvat credit on the central excise duty for fuel under the present rules. However, once GST is implemented, this will be lost. 
 
Other than these two impacts, airlines would also need to pay some compliance costs, since the centralised registration system allows them to have one corporate office, while with GST, they would need to register in each state, adding to their costs and paperwork. 
 
<a href="https://www.google.co.in/url?sa=i&amp;rct=j&amp;q=&amp;esrc=s&amp;source=images&amp;cd=&amp;ved=0ahUKEwienNLk3qnOAhWKNI8KHSwZDokQjBwIBA&amp;url=http%3A%2F%2Fwearesocial-net.s3.amazonaws.com%2Fuk%2Fwp-content%2Fuploads%2Fsites%2F2%2F2015%2F10%2Fairline-logos%40wdd2x.jpg&amp;psig=AFQjCNEDuRYaho5xzt3slOb6q071GvNMpg&amp;ust=1470467872228643">Image source</a>

GST could make air tickets costlier

The <keyword id="6361265" type="ORGANIZATION" weightage="100" keywordseo="Central-Board-of-Excise-and-Customs">Central Board of Excise and Customs</keyword> (CBEC) brought some good news for local manufacturers of mobile phones, laptops, which will also give a boost to Prime Minister Narendra Modi’s ‘Make in India’ initiative. 
 
The apex indirect taxes body, CBEC, has said that only those manufacturing goods in India can enjoy a concessional 2% duty regime without availing of tax credit on inputs, not importers who will have to pay 12.5% countervailing duty. 
 
Apart from domestic mobile phones, laptops and tablets manufacturers, coal producers will also gain from this directive. 
 
Earlier, this advantage to local manufacturers was taken away by the Supreme Court judgement. In a case related to SRF Ltd, the top court had directed that importers could avail of lower duty regime if they did not take tax credits. 
 
Reportedly, this had risked plans of foreign investors such as Foxconn Technology Group and Softbank to set up manufacturing facilities in the country and had also placed at a disadvantage the existing plants of Samsung Electronics Co. and Huawei Technologies Co. 
 
"In case of mobile phones, appropriate duty would need to be paid on inputs to be able to avail the benefit of concessional rates on final products. Accordingly, assembly of parts alone may not be a beneficial proposition," Bipin Sapra, a partner at EY, told Economic Times. 
 
The Modi-led India government has been trying to boost domestic manufacture of electronic goods in view of large domestic market being serviced mainly by imports. 
The financial daily reported that India shipped in almost $37 billion worth of telecom instruments, computer hardware and peripherals, electronic instruments and components, and consumer electronics goods in FY15, a 14% rise over the previous year. 
 
A ET news report read t hat mobile phones attract excise duty of 1% and a 1% National Calamity and Contingency Duty if no central value added tax (CENVAT) credit on inputs used is claimed, while a 12.5% countervailing duty is levied on imported devices. 
 
"The government has reinforced its commitment to promoting manufacturing in India by restoring the duty incentives to manufacturers of certain commodities," Sapra told ET. 
 
(Image: Indiatimes)

Domestic mobile phones and laptops manufacturers get tariff advantage once again, thanks to CBEC

In last one year, India was overwhelmed by a tsunami of well-intentioned jargons! The ‘Make in India’, ‘Digital India’, ‘Skill India’, ‘Start up India Stand up India’ and ‘achhe din’ platforms raised expectations on the government to ‘walk the talk’ in the <keyword id="2783177" type="UNKNOWN" weightage="20" keywordseo="Budget-2016">Budget 2016</keyword>. 
 
However, the ground realities are that government does not have leeway to announce high profile sops! The expected rise in expenses of Rs 1.1 trillion for pay commission will leave the government hard-pressed to stand by its promise of limiting fiscal deficit to 3.5 % of GDP by 2016. To provide fuel to the ‘Make in India’ juggernaut, a hardnosed pragmatic approach would be in order. The five things that I hope Government will do to benefit manufacturing are: 
 
1. Reduce Subsidies and Reduce Taxes. Government taxes high to subsidize high. Both acts distort the market and are inhibitors of growth. The subsidies on fuel, food and fertilisers by themselves are likely to be a whopping Rs 2.27 lakh crore. A 10 % decrease in these subsidies can create surplus to offset angel investment tax and reduce capital gains tax. This would enable a positive startup culture in the country and motivate startups to remain registered in the country. 
 
2. Risk Sharing by Government. I hope the government will bolster the funding of ‘Mudra Bank’ and ‘Atal Innovation Mission’ to share financial risks of innovation currently borne totally by our entrepreneurs. I expect an enhancement of 100-200% in the corpus of these initiatives. Outside the budget, if the government can pass the languishing bankruptcy act, these would bring in tandem affects on such entrepreneurs to take more risks and invest in R&amp;D. 
 
3. Incentives to Incubators. The government's aim to set up 35 new incubators in existing institutions and further 35 new private sector incubators with government funding support can be a game changer in industry academia relationships. I firmly believe that academia has a strong role to play to bring in rigour and efficiency in our startups and that can only materialize if they are incentivized. 
 
4. Promoting Skilling. With the government having set the target of skilling 500 million people by 2022, Budget 2016 is crucial for education and training sector. I hope government will tweak CSR norms to provide up to 200% tax benefits to companies funding skill development. Under Defence Procurement Procedures 2016, it is hoped that offsets discharge will cover the service of skill development to give fillip to the sector. 
 
5. Changes in Service Tax Regime. While clouds persist on passage of GST, government should remove the restrictions/ limitations imposed on obtaining CENVAT credit. This will make manufacturing more competitive by reducing the burden of taxation on locally made goods. 
 
It is hoped that a friendlier policy towards startups will boost ‘Make in India’ and if the government is able to have GST passed in current budget session, I have a strong feeling that there would be no looking back. 
 
(The article is authored by Col. Rajiv Bhargava. He is an alumnus of ISB and currently serving as Associate Director with the Munjal Institute for Global Manufacturing at ISB) 
 
(Image: Indiatimes)

5 things that Budget 2016 should incorporate to bolster manufacturing

We came up with a wishlist for direct tax framework in the country. Now its time for the industry to come up with yet another wishlist but this time, it is for indirect taxes. The industry has seen the <keyword id="6360789" type="ORGANIZATION" weightage="20" keywordseo="Modi-Government">Modi government</keyword> taking some bold steps as far as taxes are concerned. Beside this, a investor-friendly environment will pump up India’s rank on the list of ‘Ease of Doing Business’, which is also one of the key goals for the current government at the Centre. And keeping this in mind, the industry has suggested a few recommendations. Here is the list: 
 
Goods &amp; Services Tax (<keyword id="6354679" type="ORGANIZATION" weightage="20" keywordseo="GST">GST</keyword>) 
 
The central government has already taken a significant step forward for the implementation of the Goods and Services Tax (GST) in India. On December 19, 2014, the Constitution (122nd Amendment) Bill, 2014 has been tabled in the Indian Parliament, outlining and paving the way for introduction of a GST regime in India. With the state governments arriving at a consensus on various aspects of the GST regime, the Centre hopes to introduce GST in India at the earliest. 
 
Extend Excise Duty Benefits 
 
The Modi government had shown its intent for augmenting the growth of the manufacturing sector in India by extending the Excise duty benefits to the automobiles, consumer goods and capital goods industry till December 31, 2014. Now, in order to revive the manufacturing sector in India, it is the need of the hour to continue the duty sops beyond the said date. 
 
Address Issue of double taxation 
 
Double taxation of certain transactions like taxation of intellectual property rights, supply of software, works contracts, etc. ,also require immediate attention. Ambiguity as regards levy of VAT and service tax on such transactions has been continuing for long. Although these issues have been examined by the courtson various occasions, but the position is still not settled. And as a result of whichthe assessee is paying both service tax and VAT. 
 
Rethink pre-deposit provision 
 
The Union Budget 2014-15 introduced provisions for a mandatory fixed pre-deposit of 7.5% of duty/penalty demanded for filing appeal with Commissioner (Appeals) or the Appellate Tribunal at the first stage. Another 10% of duty demanded or penalty imposed for filing second stage appeal before the Appellate Tribunal. It is seen that in most cases the demands raised by the department are either on procedural aspects or not in line with settled judgments on similar issues. Such demands are invariably quashed by the Appellate Tribunal. Given the same, a rethinking on pre-deposit provisions for filing appeals may be a prudent step in the direction. 
 
Reconsider service tax on educational institutions 
 
The Union Budget 2014-15 imposed service tax on 'auxiliary educational services' as well as renting of immovable property services provided to educational institutions (the said services were exempt from service tax prior to July 11, 2014). Post July 11, 2014, only four services provided to specified educational institution enjoy exemption from service tax, namely: transportation of students/faculty, catering, security and housekeeping, and services pertaining to admission and conduct of examinations. This amendment would have an adverse impact on the education sector and substantially increase the cost of educational services being provided by the institutions. There is no output service tax on educational institutions in India. Effectively educational institutions cannot claim cenvat credit of the service tax paid on these services. This eventually leads to an increase in the cost of provision of educational services. Therefore, levy of service tax on educational institutions needs a re-look. 
 
Revise penal rates of interest 
 
The Union Budget 2014 (w.e.f October 1, 2014) has substantially increased the interest rates for delay in payment of service tax (for a delay for a period beyond 6 months and upto 1 year) rate of interest is 24%. On the other hand, the rate of interest has been increased to 30%. Such high rates of interest are unfair especially in cases where the delay in payment of service tax by an assessee is under a bonafide belief due to interpretational, valuation/ or classification issues. In such cases, it is recommended that the interest rates should be restored to 18% per annum so as to reduce the cost burden on an assessee. Penal rates of interest may be prescribed in cases where an assessee has wilfully defaulted in discharge of his service tax liability. 
 
Finance Minister Arun Jaitley is expected to bring a slew of changes to kickstart India’s economic growth and move forward towards a non-adversarial tax system. The ball now lies in the court of the finance ministers as he will be delivering the wishes of people across the country. 
 
(About the authors: This article has been written by Rakesh Nangia, managing partner and Nitish Sharma, executive director, Nangia &amp; Co.)

Budget 2015: Reforms that Govt must initiate in Indirect Tax mechanisms

Indians love travelling to both domestic as well as international destinations. And while the country offers diverse <keyword id="20048" type="CITY" weightage="20" keywordseo="tourism">tourism</keyword> experiences to travellers from all corners of the world, travel industry players are still hoping that the government realises the strategic role that tourism and hospitality sector plays in growing the country’s economy. 
 According to a report on tourism and hospitality sector under the ‘<keyword id="6354869" type="UNKNOWN" weightage="20" keywordseo="make-in-India">Make in India</keyword>’ campaign, the sector has contributed Rs 2,17,810 crore to the GDP in 2013 and its share in the pie is expected to rise by another 7.5% by end of this fiscal. The report also recognised that tourism sector in India is one of the largest employment generator as well. 
 
However, industry players have often complained that even though the successive governments have recognised the contribution made by the sector, they have hardly given the industry its rightful due. 
 Nevertheless, this time the travel industry is hopeful of the <keyword id="6354477" type="PERSON" weightage="20" keywordseo="Narendra-Modi">Narendra Modi</keyword> government and is anticipating greater support from the Centre in terms of policies. Swaminathan Vedaranyam, CEO of Via.com, an online travel booking site, said, “As far as the travel industry is concerned, I think there is an urgent need for well-defined policies and clear commitments to ensure that all cultural heritage points are given more attention with improved infrastructural facilities”. 
 
Taxation: Killing the golden goose? 
 
Players have often asserted that multiplicity of taxes coupled with a complex taxation policy have marred the travel agents in the country. “Travel as a sector is considerably dependent on foreign transactions and can contribute substantially to the nation’s foreign exchange reserves. The taxation policy for the sector is especially nuanced and has several facets that need to be reviewed,” says Rakshit Desai, managing director India, FCm Travel Solutions and Flight Shop. 
 
He added, “By extending the measures introduced in the previous budget, we look forward to some fundamental changes to simplify tax structures. A case in point is the CENVAT credit for services benefiting from an abated tax rate. Currently applicable to rent-a-cab services and tour operators, this needs to be expanded to cover the complete gamut of travel related services covered by abatement to limit taxation to value addition.” 
 
It should be noted that most players have often complained that multiplicity of taxes in India gives an edge to other Southeast Asian countries such as Singapore, Indonesia, Thailand and Malaysia. 
 
Is it an unfair treatment? 
 
Subhash Goyal, chairman of STIC Travel Group and president of Indian Association of Tour Operators (IATO), said, the industry may get some relief on implementation of the Goods &amp; Services Tax (GST). 
 
“The problem is that tourism is not treated at par with other export-based sectors. While sectors that export goods are exempted from service tax, the tourism industry, which is a part of service sector, is made to pay the service tax. We want the government to treat us as other foreign currency earner,” averred Goyal. 
 
Desai of FCm Travel added that a slash in service tax will be a much needed relief to foster the sector’s growth. “This would be especially beneficial for travel operators in case of services rendered to foreign offices of global and multi-national companies, where travel originates outside India and payments are received in foreign exchange,” he noted. 
 
Revitalisation of associate industries 
 
India has a large base of air passengers. However, complex tax structure and lack of infrastructure is not allowing the airline companies to harness this resource to the fullest. 
 
Industry players have asked the government must focus on reducing the taxes on aviation turbine fuel (ATF) as it has made airfare in India expensive, which has adversely impacted the sector. 
 
According to Goyal, since the tax paid on ATF varies in different states, the implementation of GST becomes more imperative. “The government should restrict the tax levied on ATF to a maximum of 5% as anything more than that can make air travel in India expensive, thus benefiting other Southeast Asian destination such as Thailand, Singapore, Indonesia and Malaysia, which are more cost-competitive,” he pointed out. 
 
Also, the lack of infrastructure has adversely impacted the growth of the aviation industry. Vedaranyam said, “There is a recent spurt in domestic travel as well as a higher influx of foreign tourists in India and with dedicated upkeep of the tourist hotspots, we can ensure higher growth for the travel industry. Additionally, I wish that there is an allocation towards revitalising all unused airports in tier II and III cities as these geographies hold immense potential today. There should also be a rationalisation of air travel taxes for competitive pricing to boost travel and tourism”. 
 
In terms of the availability of adequate rooms, the travel industry expects the government to address the issue of shortage of room inventory in the major tourist destinations. DS Rawat, general secretary of ASSOCHAM, said that the government should focus on finding ways to increase the number of budget hotels for more room inventory. 
 
“The government should accord ‘Infrastructure’ status for hotel projects with minimum 50-100 rooms (from current cost-based criteria of Rs 200 crore) and reduce availability constraints by expanding mid-segment hotels of 2-3 star categories,” suggested Rawat. 
 
Innovation: the key to success? 
 To ward off the fear of cut-throat competition, Rawat recommends “Launch projects to create 50 tourist circuits around themes of Heritage, Culture, Himalayas, Desert, North East Region, Coastal, Sports and Films. Create a Hindu Circuit akin to Buddhist Circuit; explore synergy with North East, <keyword id="8470" type="ORGANIZATION" weightage="20" keywordseo="SAARC">SAARC</keyword> and South East Asian countries which have a strong ‘India’ connect”. 
 
Our view 
 
BI India feels that the government must protect the interest of the players in this sector especially since it employs a large part of our working population. The government must also realize that the industry is also responsible for bringing together several disorganised sectors and hence should implement measures that promote the growth of the travel industry. 
 
At present, India does not even contribute 1% to the international travel market. Nevertheless, it can be turned around as the country as a tourism destination has a huge potential to woo both foreign and domestic travellers.

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Budget 2016 – Here’s what India’s Telecom Sector wants urgently

Saikat Pyne

GST on cellphones, fertiliser, man-made fabric, garments may be hiked to 18 pc

PTI

Indirect Tax: Hits and misses of Budget 2015

Guest Author

GST could make air tickets costlier

BI India Bureau

Domestic mobile phones and laptops manufacturers get tariff advantage once again, thanks to CBEC

BI India Bureau

5 things that Budget 2016 should incorporate to bolster manufacturing

Guest Author

Budget 2015: Reforms that Govt must initiate in Indirect Tax mechanisms

Guest Author

Union Budget 2015: What Govt should do to boost India’s travel industry?

Purba Das

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