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Goods and Services Tax: the revolution that was promised by the current government is now all set to roll in on 1 July 2017. For months, people have been scrutinizing the new tax structure to see how good (or bad) it is for their respective interests. As it turns out, the new tax structure that promises to simplify our current one is more or less a mixed bag. It is a boon for some sectors, and a burden for others. We’d prefer to leave it to economists to decide how good this new GST regime is going to be for the Indian economy and mango people, but let’s take a moment to understand how it affects our travel plans. ALSO READ: How to save up money for a trip Also Read - GST Hike Amid COVID-19, Economic Slump to Derail Mobile Phone Industry: ICEA
Let’s start with how GST will affect our means of transport. The 160-year plus Indian Railways network is the largest of its kind in the entire continent, carrying more than 23 million passengers every day. But come 1 July, your first class and AC train tickets will get costlier, albeit marginally. The service tax on ticket charges will rise from 4.5 to 5 percent once the GST setup comes online. The price rise will be incremental at best, though, so you shouldn’t worry too much. To ensure a smooth transition, nodal officers have been appointed in each state. Also Read - Mobile Phones to Get Expensive as Government Hikes GST Rates to 18%; Manufactures' Body Disappointed
As for air fare, the new tax rate will go down to 5 percent, as opposed to the 6 percent tax rate in economy airfare. Air travel has been placed under the smallest of the four tax brackets (the other three are 12, 18 and 28 percent). But because jet fuel is not part of the GST structure, airlines will not be able to take advantage of input credit on taxes. In the end, for economy class passengers, the cost of tickets will likely stay the same. However, business class passengers may see an increase in flight fares, since airfare for this class has been placed in the 12 percent tax bracket, up from 9 percent right now. The increase could only amount to a few hundred rupees though, which should not be much of a problem in business class anyway. ALSO READ: How to book cheap flight tickets
And what if we want to skip the skies and rail track and hit the road instead? Cab rides via Ola, Uber and other cab aggregators will get slightly cheaper with GST, with tax rates for these services coming under the 5 percent bracket, down from 6 percent. However, car rental services may have to bear an 18 percent tax. This tax bracket would be applicable for services where the customer has to bear the cost of fuel. And if you plan to just buy your own vehicle, well, that is going to get costlier. All personal vehicles, from mopeds to luxury yachts, will come under the highest tax bracket. Bikes over 350 cc will actually attract a 31 percent tax in total.
Hotels will come under tax brackets based on their tariffs. Those that charge below INR 1,000 per night will be exempt from the GST structure. Budget hotels charging less than INR 2,000 will come under the 12 percent tax bracket, and those charging INR 2,500-5,000 will have to pay 18 percent. So that is going to be good news for budget travelers, but luxury travelers will be hit with higher taxes because charging more than INR 5,000 per night will come under the 28 percent tax bracket. In other words, expect high-priced hotels to get costlier and lower-priced budget hotels to remain the same, if not get cheaper.
And finally, food. Restaurants will be broadly classified as AC and non-AC restaurants under the new tax regime. Non-AC budget restaurants will face a 12 percent tax, while ‘fancy’ AC restaurants get an 18 percent tax. In both cases, taxes go up for everyone, including the hungry traveler. Budget restaurants charge around 6 percent right now, so that’s double the tax from 1 July. AC restaurants, meanwhile, charge around 10.6 percent including service tax and VAT. So if you plan to travel, expect to see travel fares remain largely the same, budget hotels to get more tempting and food to get costlier. NOW READ: How to use everyday products for packing more things
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