CA Samaaj

Kerala's Houseboat Industry Faces Tax Crisis Amid Retrospective GST Demand

Nov 23, 2024 | 04:12 PM

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Kerala's Houseboat Industry Faces Tax Crisis Amid Retrospective GST DemandThe houseboat tourism industry in Kerala, a cornerstone of the state’s tourism sector, is grappling with uncertainty as the GST office has demanded an 18% Goods and Services Tax (GST) from houseboat owners, retroactively effective from 2017. This development has sent shockwaves through houseboat operators in key regions such as Alappuzha, Kochi, and Kumarakom.

Taxation Dispute: 18% or 5% GST?

Since 2017, houseboat owners have been paying 5% GST, following assurances from the Central GST office. However, the Kerala State GST office has reclassified houseboats under the "water transport" category, which attracts 18% GST, rather than the "tour operator" category, which is subject to 5% GST.

State GST Position: Houseboats are classified as "water transport" and subject to 18% GST.
Central GST Position: Houseboats fall under "tour operators," attracting only 5% GST.

Retrospective Demand Sparks Alarm

Notices have been issued to houseboat owners, demanding payments ranging from ₹1 crore to ₹7 crore each, calculated retrospectively from 2017. If the issue remains unresolved by the end of the month, owners may be required to pay 10% of the demanded amount or face the conversion of the notice into an official demand.

Comparisons with Other States

The houseboat industry in states like Assam and West Bengal is taxed at 5%, creating a glaring disparity in taxation policies for similar services. Stakeholders argue this inconsistency undermines Kerala’s tourism competitiveness.

Impact on Houseboat Operators

The retrospective demand has placed houseboat operators in a precarious position, with many already reeling from financial strains caused by the COVID-19 pandemic.

Stakeholders Call for Action

A petition has been submitted to the state government seeking cancellation of the retrospective tax demand, but no resolution has been reached so far. Stakeholders emphasize that the dispute arises from the Kerala State GST office, urging the government to step in and align taxation policies with central directives.

Conclusion

With the month-end deadline looming, Kerala’s houseboat industry is at a crossroads. Swift intervention from the state government is critical to resolving the GST classification issue, protecting the livelihoods of houseboat operators, and preserving Kerala’s position as a premier tourism destination.