Service Tax -FINANCE MINISTRY WANTS TO RAISE TAX WITH RETROSPECTIVE EFFECT, TRAVEL AGENTS WANT 5-YEAR CUSHION INSTEAD

Tourism stakeholders form JAC to challenge Service Tax imposition

FINANCE MINISTRY WANTS TO RAISE TAX WITH RETROSPECTIVE EFFECT, TRAVEL AGENTS WANT 5-YEAR CUSHION INSTEAD

source:SIKKIMNOW

GANGTOK, 14 June: In what is being claimed as the biggest setback for the tourism industry in the region, especially Sikkim, the Finance Ministry has dampened aspirations here by imposing Service Tax on all tourism service providers in the Northeast and demanding that the account be settled with retrospective effect.
Acting on directions of the Ministry, the Office of the Commissioner, Central Excise, Customs and Service Tax Headquarters, Anti Evasion Unit, Siliguri Commissionerate has started issuing summon notices to service providers in Sikkim, directing them to submit details of the service tax with retrospective effect from 01 April 2006 which is also the date the service taxes were extended to all Northeastern states.
Addressing a press conference here today, the newly formed Joint Action Committee for Sikkim Tourism Stakeholders which is an apex committee of representatives of Travel Agents Association of Sikkim [TAAS], Sikkim Association of Adventure Tour Operators [SAATO] and Sikkim Hotel & Restaurant Association [SHRA] has appealed that the Finance Ministry include Service tax exemption under North- East Industrial Investment Promotion Policy (NEIIPP) and further waive the retrospective clause.

Former minister, SB Subedi who is the Chairman of the JAC said today that the issue was so important that the Chief Minister has also made a representation to the Union Finance Minister, Pranab Mukerjee seeking the exemption of the same.
It was further informed that both the Member of Parliaments from Sikkim had also written to the Union minister stating the negative consequences it would have on the tourism sector in Sikkim “which supported almost 60 percent of the total population of the state.”
According to the JAC Chairman, the issue had also been raised in the NE, MPs Forum which in turn had written to the Prime Minister regarding the matter which was also followed-up by a TAAS representation calling on the DONER Minister, BK Handique.
“The Union Finance Minister has also acknowledged the letter from the Lok Sabha MP, PD Rai which means that the impacts are under their knowledge. We have the full support of the state government but this is a central subject and we need to raise the issue at a larger level, thus we have first decided to hold a general meeting of all service providers in the near future which will be followed by meetings with our counterparts in the Northeast,” he informed.
Further, Lukendra Rasaily, president TAAS who shared the dais with the SAATO general secretary, DN Pradhan and SHRA president, Bhanu Pratab Rasaily, also contended that the decision of the ministry was “unfortunate” since it was intended at “killing” the local self employed entrepreneurs of the region. While saying that the service sector in the state and the region was basically a small and middle scale industry which was now the mainstay of the local economy.
“When there are subsidies for big multinational companies in the region who are exempted from almost 80 crores annually, then why are we being targeted here? There was no intimation and no awareness programmes held for us. Suddenly, they ask us for this retrospective clearance. How we can provide them something which we have never knew was required to be filed. There is a big confusion amongst the service providers which should have been cleared before these notices were being served,” he said.
Paljor Lachungpa, former TAAS president and the coordinator of the JAC in his address stated, “We are not saying that we want to evade service tax but want the ministry to give us at least five more years to stabilize our market. We are thus seeking exemption till we understand the issue better, know the logistics and maintain our books of accounts.”
According to Mr. Lachungpa, many of the 400 travel agents in the state still did not know when the Act was implemented and that even if the Act was implemented, none of the travel agents in Sikkim knew about its implications. He further stated that the service providers in Sikkim have never collected service tax from any client nor had maintained books of accounts and details related to service tax.
He also mentioned that almost 180 travel operators in the state would have to down shutters if service taxes were imposed here with retrospective effect. He mentioned that at an average a travel agent from Sikkim would have to pay an estimated Rs. 35 lakh as service tax starting 2006. He also informed that while a hotel whose tariff exceeded Rs.1000 per night has to pay a service tax of 5.15 percent on the gross annual turnover, a travel agent having a turnover of Rs.9 lakh and above would have to shell out 10.30 percent of his gross annual audit.
“If they say that the Act came into effect in 2006 why did it take them so long to send us the notices? Why were the notices not sent in 2006 itself or 2007 so that we could have been prepared for this situation,” he questioned.
It may be informed here that the subject of service tax has hit the service providers so hard that many of them feel that this shall lead to a collapse in the budding tourism sector in the state.
“The side effects of the extension of service tax in the region have started taking their toll, Since we are in the fore- front of the tourism boom in the region, we have taken it as our responsibility to protect the interest of the thousands of unemployed youth engaged with this industry. The ministry should understand that if they want to maintain socioeconomic relations in the region then they should pay immediate heed to our appeal,” stated the TAAS President.