5 Reasons Why Travelling Within India Is Costlier Than Travelling Abroad
Due to an upsurge in incomes of the Indian middle class households in the recent years, a significant rise has also been witnessed in the number of Indians visiting foreign as well as domestic destinations. And if you are planning your annual getaway, you might be surprised to know that traveling within the country is often more expensive than taking that international trip—especially if you are traveling to Asian destinations. A major factor contributing to the inflating domestic travel costs are the embedded indirect taxes, many of which, we, as customers, are largely unaware of.
- Increased service tax for rail travel
- Miscellaneous taxes on airfare
The calculation of service tax is dependent on where the traveler boards the flight for a continuous journey. In lieu of that, payments made for flights destined to or originating from the northeastern states are exempted from the levy of service tax, in an effort to boost travel to those areas.
- Service tax levied on tour operators & travel agents
You will be required to pay service tax of 12.36% on 10% of the total cost even if you are thinking about using the services of a tour operator for booking or arranging accommodation for your tour, resulting in an additional cost of 1.236%. In other cases, the tour operator would be liable to pay service tax on 40% of the gross value that they charge the traveler. This would result in an extra outlay of 4.944% for the traveler.
- In-city travel is also subjected to tax
Service tax partially or fully levied on companies is dependent on the scheme of payment of service tax that the cab operator opts for, if the radio taxi operators are individuals, partnership firms or Hindu United Family. This methodology of collecting tax is referred to as the reverse charge mechanism.
The hiring and leasing of cars has spurned intense litigation from both the value-added tax (VAT) and service tax perspectives. Sometimes, circulars issued under state VAT laws have been doing the rounds, requesting payment of VAT on the lease or rent of cars by cab operators. Some state governments are of the view that when cars are leased, it assumes the activity of permitting ‘right to use goods’, which is taxable under state VAT.
- Double taxation, a rampant phenomenon
All in all, domestic travelers seem to be the ones truly affected by all this imminent taxation, compelling many of them to choose international destinations as preferred holiday locales, as opposed to traveling in the country. Is that poised to change in the near future? Only time will tell!