Kerala AAR: 18% GST fee applied to houseboat services, but ITC available

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MUMBAI: Houseboats lazily sailing in the backwaters are icons of the Kerala tourism sector. In its most recent ruling, the GST preliminary ruling authority (AAR), Kerala-Bench, found that cruises, be they day trips or overnight stays, are subject to a goods and services tax (GST) of 18%.
That ruling was requested by EVM Motors and Vehicles, a dealership that had entered the hospitality industry. ‘Le Leela’ was a resort in the Alapuzha district that provided houseboats with state-of-the-art bedrooms, dining rooms, salons and kitchens. The houseboats were used for both overnight cruises and day trips. Meals were provided as part of the all-inclusive package, alcohol – if served, was billed separately.
The houseboat services are classified under “passenger transport services”, so the cruise company is granted an input tax deduction (ITC) for expenses for the renovation, installation, maintenance and repair of the boats.
A pre-tax credit is also granted on food, which is included in the consolidated price of the cruise in the AAR. This ruling, which clarifies ITC claims, will ease the concerns of houseboat operators who have been hard hit by the ongoing pandemic.



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