Owners of Houseboats asked to pay GST@18% beginning in 2017

Houseboat owners are in a dilemma since the state GST department has begun demanding that 18% GST be paid retroactively beginning in 2017, despite the fact that boat owners have been paying the tax at 5% all along.

The state government stated in its notice to houseboat owners that there has been misclassification and misrepresentation of taxable income.

However, boat owners have been paying tax at a rate of 5% for the past few years, based on the central GST office’s assurance to them following a question filed through Kerala Travel Mart in 2017.

Before GST, houseboats were classified as tour operators. This definition was maintained based on the central GST office’s guarantee. However, the state government has since stated that houseboats are classified as water transport and must pay an 18% tax.

The unexpected move has imposed a burden of Rs.1 to Rs.7 crore on each boat owner, even though the tourist season has yet to begin. Tourists visit Alappuzha and Kottayam’s lakes and backwaters on approximately 1,200 boats. In Assam and West Bengal, houseboats and river cruises are subject to 5% GST.

The Kerala Houseboat Owners Federation has petitioned state tourism minister Mohamed Riyas to classify houseboat operations as tour operator services and apply 5% GST. The GST Council shall provide the relevant notification under Section 11A of the CGST Act in the official gazette to review the practice of houseboat operators charging 5% GST under the tour operator’s HSN, which is applicable retrospectively from July 2017 onwards.

Travel and tour providers, as well as houseboat owners, argue that the action undermines responsible tourism. It states that tourism should use local human resources and produce since the 18% tax credit scheme will drive boat operators to purchase commodities such as food and beverages and laundry services from established businesses.

Jobin J Akkarakalam of the Houseboat Owners Association stated, “I received a notice for Rs.7 crore. Even if I sold all of my boats, I would not be able to make that much money. This might have been resolved much earlier. The demand for additional taxes will cripple the business.”

The majority of boats are over 20 years old, and it is not possible to take input credit and pass the profit on to customers, he explained. “Ours is not a transportation business. We pick up customers in Alappuzha and leave them off at the same location, for example.”

Sejoe Jose of the Indian Association of Tour Operators (IATO) believes that there should be a tax exemption for inland waterways. The majority of houseboats are converted kettuvallams. Houseboat service entails tour planning, scheduling, organization, and arrangement. It also covers village trips, speedboats, airport drop-off and pick-up, as well as lodging, dining, and touring arrangements. As a result, a houseboat operator is classified as a tour operator and is subject to a 5% tax.