The Associated Chambers of Commerce and Industry of India has sought the restoration of Notification in the Finance Bill 2005-06 so that tour and travel operators are exempted from payment of service tax on their foreign exchange earnings.
With the removal of this notification in the Budget proposals for current fiscal, the tour and travel operators have become liable to imposition of service tax on their foreign exchange earnings whereas they pay no service tax while sending people abroad.
In a memorandum submitted to the finance ministry, Mahendra K. Sanghi, president Assocham, said that tour operators render services to foreign tourists and promote
India as a tourist destination and therefore, placing their services under the gamut of service tax makes little sense.
In such transactions, the package is worked out in the overseas land and therefore these should be treated as export and therefore, exemptions on service tax on such business transactions is called for, the Assocham Chief argued.
He further pointed out that the Centre and state governments are already charging road, passenger, toll, luxury and sales taxes on the proceeds of travel operators which in total percentage terms works out to be between 35 to 40 per cent whereas in countries like China the total tax on tourists is approximately seven per cent of the total travel cost.