Sikkim Travel agents and Hoteliers seek service-tax exemption

Gangtok, June 14: Travel agents and hoteliers in Sikkim today announced the formation of a joint action committee to campaign for the inclusion of the tourism industry of the hill state in the North-East Investment and Industrial Promotion Policy so that they are exempted from paying service tax.

Over the past few weeks, travel agents and tour operators in the hill state are under pressure from the union finance ministry to pay up service tax at a rate of 10.3 per cent of their annual turnover with retrospective effect from 2006.

Members of the Travel Agents Association of Sikkim (TAAS), Sikkim Association of Adventure Tour Operators and Sikkim Hotel and Restaurants’ Association have come together to form the joint action committee.

“Some tour operators have received notices asking them to pay up service tax with effect from 2006. We had no knowledge about the service tax and hence, we never collected it from our clients. Paying the tax with retrospective effect is out of question as the amount would run into lakhs of rupees and many would have to wind up their businesses,” said former forest minister, Sher Bahadur Subedi, currently a hotelier.

He said investors in other industries were getting huge subsidies under the NEIIPP.

Those setting up industries in the eight northeastern states (including Sikkim) get subsidies in the transport, power and excise sectors and are exempted from service tax.

“We are demanding the inclusion of tourism in the NEIIPP as it is a local industry,” said Subedi, who has been selected as the chairman of the joint action committee. He said appeals would be made to the Union finance ministry to roll back the retrospective period.

“The service tax was imposed in the 2006 budget but we in Sikkim and the other northeastern were never sensitised to it. We have not realised the tax from our clients. Now suddenly the taxmen have become very active and are sending summons to us,” he said.

The organisations have already approached Sikkim chief minister Pawan Chamling and the Northeast MPs Forum with their demands.

The tour operators said barring their counterparts in Assam, those in Sikkim and other the northeastern states had no idea how to collect and pay the service tax.

“The imposition of the tax will also mean that tourists will have to pay more,” a tour operator said.

Sources in the state government said Chamling had already written to Pranab Mukherjee terming the imposition of the tax as “quite harsh” .

Sources said the forum had also written to the prime minister about the issue.

In a letter to Manmohan Singh on May 25, forum president Mukut Mithi had urged the Union government not to tax the tourism industry.

“The youths are getting employment in this sector and it is not the time to impose the service tax. Many of them do not know how to keep books of accounts. Hence, there is a need to give a window of at least five years to prepare them,” Mithi wrote in his letter.