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GST: A Negative Move

GST: A Negative Move

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Tasneem Kabir   GST

On December 24, 2018, the Parliamentary Panel maintained that the imposition of the Goods and Services Tax (GST) continues to have a negative impact on the Tourism sector in Jammu and Kashmir.

The Goods and Service Tax Act was passed in the Indian Parliament on March 29, 2017: GST is a comprehensive, multi-staged, destination-based indirect tax that has replaced most indirect tax laws that previously existed in India, and is levied on every value addition.

The Goods and Services tax has been received by the audience with equiangular appreciation as well as criticism. However, one common ground has definitely been declared – this tax impacts the Tourism Industry drastically and more so in the volatile Jammu and Kashmir region.

The indispensable, supporting scaffolding of our State’s tourism are the small-scale business owners, who find it very challenging to even list their properties on various travel intermediary websites, as the 18% GST that is levied on them cuts across the minuscule profit they make, rendering their ventures “unsustainable” and often loss-making. Amidst such agony, reports indicate that 78% of the state’s small-enterprise owners find their work a cumbersome task that yields no reward.

This statistic is further supplemented by the throngs of enterprises that have been forced by circumstances to shut down, as evident in the now-deserted hotels and lodges that dot the areas of J&K that are popular with the tourists. This has also brought to surface the capitalistic evil of converting our ‘wants’ into ‘needs’, for in areas that a tourist is bound to visit, the dearth of affordable lodging options forces them to splurge on high-end hotel chains and resorts. This is how the poor consumer is trapped into opting for services whose utility is lost to him!

In another major blow to the poor Kashmiri craftsman who relies solely on the tourists to buy his mass produce, it is not only the harsh implementation of GST that is holding him back from fending for his family.

It is further aggravated by the situation of a no-show from the tourists’ part: the negative and guilefully sensationalized portrayal of the political situation in the Valley hinders tourists from visiting the state. The gravitas of this gross misdemeanor goes as such: conflict and clashes in a far-flung area that tourists have no business with, is amplified over mass-communication to look like the whole state is seething with bombshells and the thick after-smoke of teargas and coerced crowd dispersions.

Clearly, the media representatives need to be educated about the Valley in the realest sense, and the supposedly ‘Welfarist’ nature of the Centre needs to be questioned.

What with the widespread media and broadcasting censorship that the government is busy imposing on the nation, alongside the fact that that Jammu and Kashmir remains one of the most militarized regions of India, we citizens of J&K at least expect a decent representation of the state that is conducive to prospective tourists and the creation general sense of security amongst tourists. Certainly, the Centre-backed and as-huge-as-it-gets army presence in the State should count for something. Sigh.

Coming back to GST, the major advantage that those in favor of the passage of this act cite is that it has expunged the ‘Cascading Effect’ on the sale of goods and services. A cascade tax is tax that is levied on a good at each stage of the production process up to the point of being sold to the final consumer.

It is a type of turnover tax with each successive transfer being taxed inclusive of any previous cascade taxes being levied. In simple parlance, it is a tax on tax. But let’s try and empathize with the humble entrepreneur who definitely ends up paying a single, simpler tax under GST. But what if, despite the simplicity of one single comprehensive tax, he prefers to pay the multiple-staged, various single taxes that have an overall amounting that is much lower than what they pay under a single tax? Undeniably, the hassle would seem worthwhile, for the ease of taxpaying at the cost of your entire profit is a most unworthy bargain.

Next, we come to the second-most quoted advantage of GST – the whole process of taxation is accelerated and smoothened, because GST mainly technologically driven. All activities like registration, return filing, application for refund and response to notices all need to be done online on the GST Portal.

The problem with this ‘advantage’ is that the Valley remains, especially in winters, devoid of electricity for most hours. This lack of electricity translates into lack of cellular network and ultimately to an unavoidable tribulation for the poor craftsman who is as it is grappling with electronic devices.

As for the solution to facilitate syncing of taxation and technology in Jammu and Kashmir, returning control of the state power projects that are managed by the Centre would be a good place to start. With that will come regularization of electricity and consequently, a better comradeship with technology, thus reducing the burden and cost of compliance.

Let’s look at nation-oriented figures: The hospitality and tourism industry is one such sector in the economy that is deliberating over the new tax regime. Hospitality is one of the most competitive and steadily growing industries in the country. The tourism industry contributes nearly $136 billion to India’s GDP and is expected to further grow to US$ 280.5 billion by 2026.

Hospitality and tourism are also among the highest employment generating sectors and among the top 10 sectors in the country with the highest volume of foreign direct investment. In addition to being one of the top sources of foreign exchange, tourism is also among the highest tax generating sectors in the country.While, GST will make India a bigger player in the global hospitality and tourism industry, there is no global competitiveness in tax rates.

Other Asian countries such as Japan and Singapore have much lower tax rates in the hospitality sector (8% and 7% respectively) which is amongst the top reasons why tourists prefer to visit these countries and others such as Malaysia, Thailand, etc. As for individual states, there is a whole different story.

States, sectors and even people are often said to be coming out of the grey and into the realm of color, but the situation seems to be of a reverse nature for tourism in Jammu and Kashmir. Prior to the heart-wrenching insurgencies of the 1990s, the state was blooming with tourists, visitors, film-makers, adventure seekers and documentary makers and the Tourism Sector remained the most profitable business, employing lakhs of people and nurturing entrepreneurship. This was the phase when the coloration of J&K was most vivid.

 

Post the conflict-ridden times and in the 21st Century, the state is seen slowly shedding its rainbow-esque feathers and stepping into the grey-scale tones of failed, dismal and discouraged business and craftsmanship in the industry.

Notwithstanding the fragile state of the J&K Tourist Sector which is still in the stage of recovery from the shocks of the ‘lost decade’, the stringent implementation of GST has aggravated the situation to a point where even statistics paint a ghastly picture.

Reports place the average decline in the profitability of employment in the Tourism sector of Jammu and Kashmir from 1990-2010 at 57%, which is a sorry figure indeed.

As profound winters set in and ‘daring’ crowds head to Kashmir to experience pristine blankets of snow crumble underneath their boots-clad feet, there are certain things pertaining to the Tourism sector that demand attention.

Foremost is that the implementation of GST and its rate in the state on Tourism-related activities be revisited, bearing in mind the once-fractured and still recuperating health of the state’s political and economic revival. After all, the Indian outlook is one of Justice, which is a virtue more priced than Equality.

Next, as for countering the bad ‘advertisement’ of the State in the media, the Central Information and Broadcast Ministry needs to take a front seat. Incidentally, the Parliamentary Panel has also urged the State Tourism Ministry to up the ante in its advertising and initiate its own publicity campaign, to counter the negativity out there.

Further, there unfortunately still are countries that issue advisories to their citizens against travel to Jammu and Kashmir, and it would make sense for the Ministry of Information and Broadcasting as well as that of External Affairs to take the reins in correcting this situation. Lastly, as for the well-being of the local craftsman, we need to work on bringing about a spurt in formalization of the unorganized sector.

With all the tourists thronging in large groups to Jammu and Kashmir under the status quo, it would be splendid to see what an increment paying heed to the aforementioned issues will bring about in these numbers. Here’s to hoping for a time in the near future where every tourist season, the state sees itself full to capacity with tourists and glistening under the rays of well-deserved revenue!

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