Now consumers will pay more for various services starting June 1, 2015. In the Union Budget, finance minister Arun Jaitley had proposed to increase the service tax from 12.36 per cent to 14 per cent. This service tax hike, applicable from June 1 onwards, hasn’t been well received by the Indian hospitality and travel industry. According to them, the hike will adversely impact the end consumers’ frequency of dining out, the number of inbound tourists to India, among others. Speaking on this, Bharat Malkani, president, Hotel and Restaurant Association (Western India) stated, “Over the years dining out has reduced drastically and an additional tax burden will make it worse.

The whole policy will force the industry to gravitate into the unorganised sector. Hotels will increase their room rates and the volume of tourism will also get impacted. We had previously requested the government to exempt the hospitality sector from paying service tax as it amounts to multiple taxation and we will continue to do so.” Giving another viewpoint, Kamlesh Barot, past president, Federation of Hotel & Restaurant Associations of India (FHRAI) and Hotel & Restaurant Association (Western India) opined, “We had been protesting against the service tax issue from the beginning. It is unconstitutional to charge twice on one commodity by the state and centre, that is the point of contention and not the 1.64 percent hike in the service tax.”

As for the travel industry, the hike will have an adverse impact on inbound tourism to India considering that the country is an expensive destination. “This isn’t a welcome step. The travel industry is already burdened with multiple taxes and steps should have been taken to smoothen the process. The government shouldn’t have hiked the service tax before the proposed implementation of the Goods and Services Tax (GST) Bill from April 1 next year,” pointed out Subhash Verma, immediate past president, Association of Domestic Tour Operators of India (ADTOI).

Reiterating the same, Sampat Damani, chairman, Western Region – Travel Agents Association of India (TAAI) opined, “Travel and related activities will become expensive. Though corporate travel will not be impacted, the hike will impact leisure and FIT travellers. However, we hope the government has good intention since the GST is expected to be implemented next year.”