India is currently getting ready to roll out the Goods & Services Tax with effect from July 1, 2017. Currently, consumers in India have to pay multiple taxes at different rates. These taxes also differ from state to state. The idea behind introducing the GST is to simplify the current complex tax system.

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However, the idea of noble intention is not sitting well with Indian traders as it would make everything either really cheap or really expensive depending on the policy that is being applied. The system is not fully ready and laws are getting updated and we would know more after 1st July when the law is implemented.

Currently, the tax system is very random everywhere. Now we would have same tax everywhere. Your movie tickets will become cheaper.  There would be a massive relief for people in metros as everything would feel much cheaper as they have been paying up to 45% taxes which would reduce to 28% now. GST tax rates are distributed across different rate bands of 5%, 12%, 18% and 28%.

GST FOR TRAVELERS

  1. Air Travel

    Current Taxation vs. New Regime

    The Services Tax is applicable on all bookings made; be it for the economy class or for business class. The tax rate under the VAT regime is:

    ticket prices for airlines under vat regime

    Under the new regime, the GST Council has lowered the tax rate for economy class flight tickets to 5%. However, the business class tickets will attract a higher tax at 12% after GST implementation from 1 July. 

    Although the drop from 5.6% to 5% is pennies on dollars. It is still savings for people and low-cost airlines are going to be able to provide more sales. Whereas it is an increase of 3 percent on the business class sector which is a minor change for people who really can afford business class. Of course, there might not be a major change from award bookings.

    If you are a frequent flier, you will find the impact of GST on air fares and the new tax rates and ticket prices to your liking. The reduction in tax rate is positive for low-cost domestic carriers. However, it remains to be seen if the airlines will be willing to pass on the benefits of the reduced tax rate to customers. A major portion of the revenue generated from airlines comes from economy travelers

     

    International Travel

    Normally, India is a small country and flights are usually not longer than 2 hours 30 mins unless there is a connecting flight. So most people do not care about business class. However, when it is an International long distance travel more than 6 hours, people really care for Business class tickets. 

    The 3 percent rise might feel a major change for people paying top dollar already. I am yet to see what would happen on International sectors. However, if you feel you are getting the short end of the bargain, you can always use VPN and book from another country. Of course, do this only if you are getting a real benefit as your Credit Card might charge you foreign transaction fees which are lethal.

  2. Hotels

    Budget hotels that you book via OTAs are going to get cheaper whereas Luxury Hotel is going to get more expensive. However, I am sure that would change a lot of hoteliers to change the price system. If they are 3/4 star hotel who are used to overcharging their clients, they might drop the price little bit to be in the 18% bracket.Hotels priced below 

    Below Rs 2500 Rumored  5% to 13% (not confirmed)
    Rs 2500 to Rs 7500 18%
    Rs 7500 and higher 28%

     

    Current Scenario 

    Luxury Tax

    Per Day room Rent Maharashtra   Per Day room Rent Delhi
    < = Rs 1000 Nil < Rs 750 Nil
    > Rs 1000 but < = Rs 1500 4% > = Rs 750 but < Rs 1000 3%
    > Rs 1500 10% > = Rs 1000 10%
     
    Per Day room Rent Assam   Per Day room Rent GOA
    < Rs 1000 Nil < = Rs 500 Nil
    > = Rs 1000 but < Rs 1999 5% > Rs 500 but < = Rs 2000 5%
    > = Rs 1999 but < Rs 2999 8% > Rs 2000 but < = Rs 5000 8%
    > = Rs 2999 12% > Rs 5000 12%

    VAT (Value Added Taxes)

    VAT is included only if food/beverages are consumed. VAT ranged from 12% to 18%. Most of the hotels used to charge 14.6% for the food and 18% for liquor. 

    Service Tax = 14% levied on 60% of billable amount usually around 8.40%

    Comparison (We will assume that breakfast is complimentary for simplicity)

    Room Rental Price PRE GST Post GST
    Rs 1000 to Rs 2000 Luxury Tax = 4 % to 10%
    Service Tax =8.40 %
    Krishi Kalyan Cess = 0.3%
    Swacch Bharat Cess = 0.3%
    Total = 13% to 19%
     Unknown but assumed as either 5 % or 13%
    Rs 2000 to Rs 7500 Luxury Tax = 10 to 12.5%
    Service Tax = 8.40
    Krishi Kalyan Cess = 0.3%
    Swacch Bharat Cess = 0.3%
    Total = 19% to 21.5%
     18%
    Rs 7500 onwards Luxury Tax = 10 to 12.5%
    Service Tax = 8.40%
    Krishi Kalyan Cess = 0.3%
    Swacch Bharat Cess = 0.3%
    Total = 19% to 21.5%
    28%

    Moreover, Hotels won’t be able to charge secret charges like ITC Sheraton and ITC Maurya secretly adds Rs 3000 to tariff without any reason. They won’t be allowed to do that anymore.  

    I see overall huge gain of value for Hotels up to certain categories. On many days you can get a lot of top end hotels around Rs 4000 to Rs 7500 and hence it will save you money. On the flip side, when hotels are really expensive, you are going to fill a big pinch in terms of taxes. There is a rise of almost 8 to 10% tax. 

    So you might want to use Cash and Points or Points for those hotels to keep down the cost. However, for most of the hotels, cash and points doesn’t allow you to earn points. Only, you may or may not get elite staying night credit subject to hotel chain you are loyal for.

  3. Train travel

    AC and first-class train travel will become a little expensive after the GST because service tax is set to increase from 4.5 per cent to 5 per cent. However, non-AC travel, including local trains, metro, and religious travel will remain exempt from tax.

     
  4. Cab rides

    Hailing an Ola or Uber cab will become cheaper from July 1, as the incidence of tax will come down a bit to 5% from 6% for booking made on cab aggregators like Ola, Uber, Meru Cab and Mega Cab. Renting of vehicles from car rental services like Zoom Car and Myles will also attract 5 per cent service tax. However, if the fuel is borne by the service recipient, then an 18 per cent GST will apply to the service provider.

     

  5. Bus rides

    The GST Council decided to exempt from IGST the interstate movement of any mode of conveyance from one location to another. “ Moreover, local buses including mini-buses and pick-up vans, carrying more than 10 individuals, have also been exempted from tax.

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Cody is a native of city Indore, Madhya Pradesh. He acquired a degree in Engineering (IT) from Rajeev Gandhi Technical University, Bhopal. He had a keen interest in the field of networking and network security and took various courses such as OWASP, EC Council’s Certified Ethical Hacker (CEH), Cisco Certified Internet Expert (CCIE) Routing and Switching. After finishing his education, he joined up corporates to establish his career as IT Tester and Auditor. He moved up to become IT consultant and shared his expertise with IT industries.

Cody loves traveling and socializing. He has traveled over 30 countries in the past two years. He enjoys flying business class and staying in 5-star hotels. He has been featured in multiple publications such as Times of India, Dainik Bhaskar, magazines such as Men’s Health. He was invited to inspire people on a platform such as TEDx.

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