Introduction & National Revenue Overview

GST law in India is a comprehensive, multi-stage, destination-based tax which is levied on all forms of supply of goods and provision of services, except liquor for human consumption and petroleum products (www.cbic.gov.in).

The gross GST revenue collected in June 2022 is ₹ 144,616 crore of which CGST is ₹ 25,306 crore, SGST is ₹ 32,406 crore, IGST is ₹ 75,887 crore (including ₹ 40,102 crore collected on import of goods) and cess is ₹ 11,018 crore (including ₹ 1,197 crore collected on import of goods). The gross GST collection in June 2022 is the second highest collection next to the April 2022 collection of ₹ 1,67,540 crore².

FIGURE 1: Trend of GST Revenue Collection in India (₹ in Crores)

Source: GST Council, Department of Revenue, Ministry of Finance, Government of India.

Advantages of GST Law for Tourism Industry

Following eight advantages of GST law have been identified for further analysis, based on structured open-ended-interview of twenty players of the industry:

• 1. Administrative Ease (C1): GST has subsumed many state and central indirect taxes and eased the compliance with single GST and its rules and procedures. This has provided administrative ease for all players of the tourism industry.
• 2. Clarity of Tax in Customers’ Mindset (C2): During pre GST implementation era tax payers and ultimate customers were feeling difficulty to understand various tedious provisions of excise law, VAT, service tax, etc. Under the GST regime, the customers have a single tax on their bills which provide clarity of the taxation structure besides paying for lesser taxes.
• 3. Easy Tax Compliance (C3): GST online portal provides many online services like registration, tax payment, return filing, generating IRN and QR code etc. The taxpayer can easily comply all the legal requirements through GST common portal. So, there will be no more troubles to the taxpayers and customers at check-out time.
• 4. Availability of ITC (C4): The tourism industry is now entitled to claim ITC on inputs. In the pre-GST era, taxes paid on inputs such as raw food grains and other consumables were difficult to match with the final product, due to this mismatch the ITC for such inputs was not available. The post-GST era has improved this situation by providing seamless ITC for maximum inputs.
• 5. Reduction in Cascading Effect of Taxes (C5): ITC is available throughout the GST value chain, so one can use input taxes to reduce the tax he pays on output supply. Therefore, the effective GST paid by the taxpayer to the government is the difference between the GST for outbound supply and the GST already paid for inbound inputs.
• 6. Reduction in Multiplicity of Taxes (C6): The GST has subsumed in it almost all the previous indirect taxes (Except Custom Duty) that were levied on the sale of goods and provision of services by either Central government or State government. This subsumation of large number of indirect taxes will now allow free flow of seamless tax credits.
• 7. Exports to be Zero Rated (C7): Sec 16(1) of IGST Act provides that any supply of goods or services made by the tax payer as an export or any supply to a SEZ qualifies for zero rated supplies in GST and no tax is levied on such supplies as well.
• 8. Differentiation between Goods & Services is no Longer Required (C8): Schedule-II of CGST Act provides vide classification of goods and services. It has covered almost all the grey areas of classification disputes of pre GST period.

Demography of Interviewees

• FIGURE 2 – Industry Players Demography (GST Advantages Phase 1): Accommodations (35%), Restaurants (20%), Tour Operators (20%), Shoppings (15%), Adventure (10%).
• FIGURE 3 – Stakeholder Demography (Pairwise Comparison Phase 2): Industry Representatives (37%), Chartered Accountants (25%), Finance Professors, and Tax Lawyers.

Research Methodology: Analytic Hierarchy Process (AHP)

The available literature offers several methods to analyse qualitative data including: correlation, factor analysis, multiple regression analysis, etc. In this study, AHP technique has been used for pairwise comparison. The reason for prioritizing AHP over other approaches is that the benefits of GST are based on the experience of the respondents and are very subjective in nature. AHP approach can handle both qualitative as well as quantitative data efficiently.

The AHP approach as developed by Saaty, is one of the popular methods of qualitative data analysis that can be easily converted into ranked or pairwise comparisons. This method makes it easier to understand complex problems by using it. This approach breaks down the decision problem into nine levels and forms a hierarchy with a hierarchical relationship between these levels.

The results in this work were analysed in two phases. In first phase, primary data was collected from twenty players of the industry across the country. To analyse perceived advantages of GST laws for them, open-ended structured interviews were conducted during June and July, 2022. Eight such common perceived advantages were selected to analyse through AHP approach. In second phase, earlier collected responses from twenty players of industry out of which 16 valid responses having less than 0.1 consistency ratio were selected for the AHP analysis. Respondents evaluated each parameter on a nine-point scale, as suggested by Saaty (1970).

TABLE 1: Saaty’s 1-9 Scale of Pairwise Comparisons

Source: Saaty, 1970

Stepwise Process of AHP Execution:

• Step 1: Recognition of significant advantages of GST law implementation for tourism industry through open-ended, structured interviews from twenty players.
• Step 2: Data collection from twenty players through AHP questionnaire designed on Saaty’s 9-point qualitative scale.
• Step 3: Construction of a square matrix comparing advantages on a pair-by-pair basis using geometric means in MS Excel.
• Step 4: Calculation of relative weights (eigenvectors) for all eight identified advantages.
• Step 5: Calculation of Consistency Index (CI) and Consistency Ratio (CR) using formulas:

Where RI is the Random Consistency Index, λmax is the average measurement of consistency, and n is the number of compared advantages (n = 8). For n = 8, RI = 1.41.

TABLE 2: Random Consistency Index (RCI)

Source: Saaty, 1970

Analysis of Data and Empirical Findings

TABLE 3: Eight Identified Perceived GST Advantages for Hoteliers

TABLE 4: Pairwise Comparison Matrix of the GST Advantages

TABLE 5: Normalization Matrix and Weight Computation

“Schedule-II of CGST Act provides vide classification of goods and services. It has covered almost all the grey areas of classification disputes of pre GST period.”

Summary, Conclusion & Final Ranking Hierarchy

This study empirically tests eight identified advantages of GST implementation which were identified on the basis of open ended structured interview of twenty hoteliers. To analyse the comparative importance of the advantages of GST as per hoteliers’ response, AHP method has been used.

It has been found that the “reduction in cascading effect of taxes” (29%), “reduction of multiplicity of tax” (28%), and “clarity of distinction between goods & services” (13%) are the major benefits of GST for hoteliers. “Clarity of tax in customer’s mindset” (12%) and “availability of ITC” (8%) are the intermediate benefits, while “easy tax compliance” (4%), “exports to be zero rated” (3%), and “administrative ease” (2%) are the minor benefits.

TABLE 6: Hierarchy of Advantages for Hotel Business

“GST online portal provides many online services like registration, tax payment, return filing, generating IRN and QR code etc.”

Evaluation of GST advantages in this study in ranking order will be beneficial for the tourism industry, its suppliers and customers, GST practitioners for taking maximum advantages of such GST provisions. GST Policy makers may also use this study to check and reassess the purpose of such provisions, whether they are achieved or not. They may also use this study to reconsider the low ranked advantages for further improvements in GST provisions for providing ease of doing business for the tourism industry.

¹ Source: https://gstcouncil.gov.in/sites/default/files/The-gst-saga.pdf
² Source: https://gstcouncil.gov.in/sites/default/files/gst-statistics/GST_Revenue_collection_june2022.pdf

Authors may be reached at: sanjeevkrsn@gmail.com and eboard@icai.in