Soon travel packages to become cheaper. The government is looking at a proposal to allow tax credits to tour operators, which will reduce the incidence of the goods and services tax on those booking holidays.

In the last Goods and Services Tax (GST) Council Meeting, the said issue was discussed but the solution to it deferred in the air.

Currently, the Council has 2 options that are as under:

1. 12% levy with credit for tax paid on all inputs.
2. Credit for input services in the same line of business with levy being at 5%

At present, tour operators pay 5% tax on tours, but without any input tax credit. The tourism industry has been lobbying for input credits as the total tax incidence on tours, according to them, is much higher at about 25% or more.

A tour normally consists of hotel accommodation, local sightseeing and entry to monuments. While entry to monuments has been exempted in the last GST Council meeting and guides are mostly unregistered, industry insiders say there is still an incidence of 15-20% tax on the tour, depending on the room rate of the hotel selected. GST is levied over and above this, taking the total tax incidence to close to 25%, increasing further if the package is sold to another operator because of the embedding of taxes.

Source: Economic Times