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GST: Luxury travellers to feel the pinch

BS Reporters/New Delhi 20 May 17 | 02:56 AM

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The new GST will make your travel cheaper but be prepared for a bigger hole in the pocket if you are a luxury traveller. True to its aim of making travel more affordable, the tax rate has not been raised on the transport sector. Finance Minister Arun Jaitley on Friday announced the rate at five per cent (rail, air and road travel). This is less than the prevailing six per cent, while both passenger and sleeper class rail travel have been exempted from GST. 

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Another reason for keeping the rate on transport services in the lower bracket is because unlike other sectors, many entities here will not get input credit on tax paid. “Since the transport sector’s main input is petroleum, which has been kept out of the GST ambit, they will not get any input credit on tax," said Jaitley.

However, the tax rate for business class travel was increased by three per cent and senior railways ministry officials said GST would lead to an increase of 1.3 per cent from the current 3.7 per cent in fares for the air-conditioned class and freight services.

“By ensuring that the new rate structure is not inflationary, the government has demonstrated its pro-consumer, pro-business stance. GST will simplify the tax regime in the country and we are excited to see how its impact unfolds across different sectors," said Amit Jain, president, Uber India & South Asia.

Experts termed it a big positive for the sector. S P Singh, coordinator, Indian Foundation of Transport Research and Training, said the uniform five per cent service tax rate for goods transport under GST, along with the hefty benefit of input tax credit to transporters, was most likely to bring down net transportation cost and, so, gross freight charges by 4-10 per cent. 

For the aviation sector, the new rate is a big positive; it was bracing for a higher one. Though the rate for the business class was increased to 12 per cent from the current nine per cent, experts said this would have no impact. “Most of the seats in the domestic sector are in the economy section, where there has been a reduction of one per cent," said Peeyush Naidu, partner at consultancy Deloitte India.

Low ticket prices helped India become the third largest aviation market in 2016. “The new rates will continue to support an affordable fare regime. Expect the high growth rate in domestic traffic to continue in the near term, with further upside once the GST impact on the economy is visible in one to two years," said Kapil Kaul, chief executive, South Asia, at CAPA.

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