The Hindu Business Line : Tour operators threaten stir against service tax

TOUR operators have threatened to go on an agitation against the Centre's move to impose a service tax on their foreign exchange earnings. Urging the Government to reconsider the move, the Indian Association of Tour Operators (IATO) said they would resort to agitation if the levy continued in its present form.

With the imposition of the service tax, tour operators will have to increase the prices of tour packages, putting additional burden on tourists and making India uncompetitive as a tourist destination compared to the neighbouring countries the IATO President, Mr Subhash Goyal, said here on Friday.

"The Central and State Governments take away 37 per cent of the total travel cost of tourists in the form of taxes such as road tax, passenger tax, toll tax, luxury tax and sales tax. If more taxes are imposed, India will lose competitiveness in the world market," Mr Goyal said. He said that in most countries, the tax paid by tourists was seven per cent of the total travel cost. "This is one of the major reasons why China has crossed 50 million arrivals a year while India is lagging behind at three million tourist arrivals per annum."

The Government, Mr Goyal said, should do away with the multiplicity of taxes and levy a flat 10 per cent tax on tourists to bring down costs.

"If India becomes a cheaper destination, tourist arrivals would increase and the Government's collections would go up substantially," he said.

The Government, which earlier exempted all services that earned foreign exchange from service tax, subsequently issued a draft notification saying that only services that were rendered or delivered outside India would be eligible for exemption from service tax.

Mr Goyal said though tour operators did not export services, all their transactions were held abroad and should be exempted from service tax. He said the tourism associations would have to resort to agitation if their demand was not met.