Service Tax for Tour Operators May Be Reduced, Says Ministry

Tourism minister Ambika Soni said tour operators can expect “substantial relief” on the service tax paid on the amount they charge customers, when the government sets its fiscal spending mid-year.

Soni declined to specify the exact quantum of relief, but the move would meet a long-standing demand of the industry and lower the cost of doing business for tour providers.

Tour operators now pay a service tax on 40% of the fees they charge customers, said Himmat Anand, chief operating officer at the India and South Asia unit of Kuoni Destination Management, an outbound travel agency.

The industry has long been looking for the overall amount on which it is taxed to be lowered to 10% of their takings.

Despite possible concessions, the finance ministry is unlikely to reduce the taxable amount to that low a percentage, said a tourism ministry source who did not wish to be named. A finance ministry official acknowledged that the ministry is considering the proposed tax reduction, but has not yet reached a decision.

In a separate announcement, the tourism ministry released its annual report for fiscal 2007 on Tuesday.

It highlighted a 13% rise in foreign tourist arrivals to 4.4 million in 2006, the success of its “Incredible India” campaign in building brand recognition, and the crores of rupees it has spent on developing tourism infrastructure. It also listed its goals to boost “the competitiveness of India as a tourist destination.”

Monica Gupta also contributed to this story.