Leisure trips had barely resurfaced in living room conversations after demonetisation had checked it, but now with the hike on service tax on holidays threatens to push them off the deck again. Although the revision that comes into effect from January 22 is small, families booking package tours are likely to feel the pinch, said travel operators.
“We expect this to have an impact on tour operators since the taxable amount of their invoices will increase from 25% to 60%. The effective impact of this service tax revision should be an extra 4.9% of the total billed amount that the user will have to bear,” said Aloke Bajpai, chief executive officer and founder of travel portal ixigo.com, adding that this was an additional blow after demonetisation hit sales with a 25% drop.
Other travel operators concurred.
“The impact is two-fold: a resultant doubling of the tax rate on the sector, and given that implementation is within a week, reaction time as well as time for advocacy is negligible,” said Mahesh Iyer, chief operating officer, Thomas Cook (India) Ltd.
He added that a person would spend up to Rs4,500 extra on a package of Rs1,00,000.
Operators added that while the amount appears small, it will compound when a family of four books packages.
“The cost difference for a person booking a five day- four night package to Thailand from Mumbai would be approximately Rs1,400. But it also means an extra Rs5,600 that the traveller could have used elsewhere,”said another travel operator who did not wish to be named.