Holidays to cost more after service tax hike

After-effects: The higher charges are also leaving tour operators worried about a possible dip in bookings.

After-effects: The higher charges are also leaving tour operators worried about a possible dip in bookings.  

The summer vacations are only two months away and there are long weekends before that to plan for shorter getaways. But, they will come at a price from now on.

The Centre’s revision of service tax rate for packaged tours booked through travel and tour agencies will result in a nearly 20% hike in charges, which will be passed on to the customers. This is because in addition to the 9% service tax that was implemented from January 22 — up from 4.5% earlier — consumers are also charged handling charges (for providing transportation, food arrangements, etc) adding up to 10% for packaged tours booked through operators in Karnataka. The handling charges differ from State to State.

This means that in effect, if customers book a holiday package worth ₹1 lakh through a tour operator in the State, they will end up paying ₹19,000 more as service tax and handling charges.

“Earlier, the service tax for booking only the hotel accommodation was 1.5%, while the tax for packaged tours was 4.5%. Now, the slabs have been abolished and any bookings made through us will be charged a uniform service tax of 9%,” M. Ravi, founder member of the Karnataka Tourism Forum, said.

The higher charges are also leaving tour operators worried about a possible dip in bookings, as those made online will not be charged service tax.

Sanjar Imam, president of the Karnataka Tourism Forum, said that the doubling of service tax was a cause for concern. Though he said the upcoming summer vacations, which is the peak holiday season, might not see a huge dip in bookings, Mr. Imam admitted that the enhanced charges would definitely be felt by people.

“Bookings for shorter duration trips are going to be affected, because they are easy to book online or directly with the hotel, as there is no service tax for bookings made online or directly. But the longer trips usually need the expertise of a tour operator,” Mr. Imam said, adding that travel agents also had the advantage of getting preferential prices.

According to Mr. Ravi, tour operators were already feeling the pinch after online players stepped into the game.

“These new charges will hit the 1,000 odd tour operators in Karnataka who have already seen a decline in business due to online portals,” he added.

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Printable version | Jun 4, 2020 9:17:24 PM | https://www.thehindu.com/news/national/karnataka/Holidays-to-cost-more-after-service-tax-hike/article17090147.ece

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