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Opening closed doors

As we envisage a New India by 2022, the tourism sector is poised to be one of the core pillars of economic growth drivers of the country. So, when Prime Minister Narendra Modi talked about the idea of promoting entrepreneurship, the Government began working on relaxing rules to encourage people to offer homestays to tourists. This would help make up for the massive shortage of 1.9 lakh hotel rooms throughout the country and increase employment, in the true spirit of the nation’s ‘Start-Up India' programme.

In line with the thrust and encouragement provided by the government to the homestay segment, India’s online travel aggregators - both global and domestic players - ramped up their focus on creating a homestay ecosystem of tourism micro-entrepreneurs across the country. However, the plan started heading south with the launch of the GST regime, which mandated the registration of all micro-entrepreneurs at or below an income of INR 20 lakhs. The complexity of multiple registrations and compliance processes and limited knowledge about the taxation system, dissuaded homestay owners from embracing this micro-entrepreneurship opportunity and signing up via these OTA platforms.

Upon seeing the response and retraction from the platforms, the OTA companies realized that this could be the biggest hurdle in working with micro-entrepreneurs that could potentially impact business growth. It was then that some of these OTAs approached Invest India for guidance.

An industry-wide representation prepared by team Invest India brought to light the problems faced by these Electronic Commerce Operators (ECO) such as Airbnb, MakeMyTrip, OYO Rooms, etc due to the GST regime. The representation was sent from Mr Ramesh Abhishek’s (Secretary, DPIIT) office to the Chairman of Central Board of Excise and Customs. Within a period of 14 days, the regulation was swiftly amended.

A notification from Finance Ministry stated that ECO shall collect and pay taxes on services in alternate accommodation including hotels, inns, guest houses etc. Unless service providers (property owners) earn more than INR 10 Lakh in North East India or more than INR 20 Lakh in other parts of India, they did not have to register for the GST regime.

This decision came as a huge relief for the Online Travel Aggregator (OTA) market and was celebrated by micro-entrepreneurs who were now easily able to access a global marketplace because of the government's ability to understand the problems of both consumers as well as the OTA companies.

The Invest India team was quick to understand the problem and pre-empted the consequences of such a move. They knew that this could create a parallel economy leading to the biggest roadblock in ending the problem of black money. Ultimately, it wasn’t about helping a few companies, but working toward the nation’s vision of Digital India and a transparent cashless economy of the future.