Under the new GST tax regime the rates have been lowered to 5% in comparison to the earlier regime that entailed a service tax of 9% on tour operators, however as tour operators and travel agencies are not allowed input tax credit, the upfront cost for outbound travellers shall rise.
Further as told by one of the co-founders of travel agency firm, companies now would have to start at a higher base price as against the earlier time when the availability of the input tax credit negated any impact on the final cost.
Additionally, levy of 12% GST on currency is also likely to add to traveller's burden. An IGST of 12% is to be levied on customers buying foreign exchange from banks.
Though, under GST, domestic travel is likely to get a boost. The case is not the same with international travel and the government should reconsider their GST rate implication to benefit the industry as well as travellers.
Tour operators are of the view that the scenario shall be counter-productive for the overall industry as most of the India-based tour operators now deal with international travel. So, the government still might consider providing input credit in respect of some input services which have direct bearing on the outward supply by these tour operators.
India is reported to be the fastest-growing outbound market globally and the number of international travellers from India is set to increase to 50 million by the year 2020.