Service sector has tourism which is one of the

Service Industry

All
services are products not all products are services.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Definition: An industry which primarily
earns its revenue to meet its expenditure by providing intangible products is
called a service industry.

Examples: Hospitality, Healthcare, Insurance,
Information Technology services, Law, Distribution business etc.

 

Hospitality Industry

The Indian hospitality industry has come
up as one of the drivers of growth of service sector in India. Hospitality
sector has tourism which is one of the top contributor in Indian economy. India
being the land of rich heritage, variety in ecology, terrains and natural
beauty, has a untapped great potential in tourism and hospitality. It is also
most promising industry in terms of employment and GDP growth.
 It is the part of service industry which
covers nearly every industry which is concerned with the satisfaction of a
customer. The primary objective is customer’s happiness and satisfaction.

This industry relies majorly on the availability
of extra income and leisure time. Because of which majority of businesses are
for tourists, both domestic and international.

If disposable income decrease the demand
for the services provide by these industry also decreases.

 

 

 

 

 

 

 

 

 

 

 

 

Taxation pre Goods and Service Tax

In
case of a hotel

A hotel where if the tariff would go
above INR 1000 was liable for service tax at 15 percent. An abatement of 40
percent was allowed to be brought down on the tariff rates, thus bringing the
real rate of service tax to 9 percent. The Value Added Tax, which ranges
between 12 percent to 14.5 percent, and a luxury tax would apply on top of
this.

In
case of a restaurant

The abatement criteria in case of
restaurants was 60 percent which means that service tax was charged on top of
this, hence the real rate would come down to 6 percent on the food and
beverages bills, apart from VAT which was charged at the same rate of 12
percent to 14.5 percent was also levied on the same.

In
case of social functions

Abatement of 30 percent was allowed.

Problem

Cascading
effect- The end user was the one who was
finally liable to pay everything as the burden of the tax was passed to it.

Industry was not getting any input tax
credit on the taxes they paid, as central like service tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

ADVANTAGES

 

Disadvantages

 

 

 

 

 

 

 

 

 

OYO Rooms

            Founded
by Ritesh Agarwal Oyo rooms is a hotel aggregator headquartered in Gurugram,
Haryana. The company was launched in the year 2012 with the name Oravel stays.
Initially it provided a website which listed and enabled people to book low
cost accommodations. This followed a marketplace type business model which was
similar to Airbnb.

The company then changed its business model to hotel
aggregation to become Oyo rooms in the beginning of the year 2013. The aim of
the company is to provide standardised services in all the hotels present in
its network at an affordable cost. The company started its network with a
single property in January 2013 and is reported to have formed a network of
over 8000 properties by the end of 2017.

The initial strategy of the company was they entered
into a contract with the hotels according to which the company hired a portion
of the hotel’s rooms and organised these rooms under the brand Oyo rooms. The
service provided by the hotels to these rooms was supposed to follow the brand
standards which were set by Oyo. In order to maintain the standard throughout
all its partners the company assists the hotels by providing them with the necessary
training in service and the supplies required. These registered rooms were
supposed to be provided for the customers who had made their bookings via the
Oyo rooms website or the mobile app.

Oyo launched its official mobile app in the android
platform on April, 2015. In addition to booking the app also provides the user
with the facilities to order room service during the stay period, early morning
check in etc. In 2016 the company started a programme called as Oyo Flagship
following which the company started to lease entire properties such as hotels
and guest houses. This led the company to hire its own staff in these
properties thus enabling them to control the day to day operations. In June
2016 Oyo launched its own online marketplace called Oyo Bazar. The main aim of
this brand is to provide a one stop shop for procurement of supplies which are
essential for the seamless day to day operation of hotels.  In January 2017, Oyo launched the Townhouse,
a brand which was entirely operated by the company. By the end of 2017 the
company has its townhouse services in eleven major cities in India.

 

OYO rooms before GST

            Oyo rooms ears its
revenues through a take up rate basis where the company charges a commission to
the partners of the firm when it is bringing customers. The net take up rate is
calculated as

         

            Although the company initially
started up with a negative net take up rate it managed to bring up the take up
rate to positive in the last quarter of the financial year 2016 and it has been
steadily increasing in the following quarters. In addition to this the
quarterly realised revenue of the company which has seen a steady increase has
reached a value which equals almost twelve times in the past two years.

            During the financial
year 2014-15 Oyo suffered a loss of INR 21 crores which almost increased 25
times to INR 496 crores  in  the next financial year with an annual income
of INR 32 crores according to business research platform Tofler. This was
mainly due to increasing expenses and investment into the firm. However in the
financial year. However Oyo was able to prune the losses by 35 percent
resulting in a loss of INR 325 Crores.

 

 

 

Impact of GST on Oyo
rooms

            Oyo rooms has been
focusing on budget hotel rooms within the price range of INR 1000- 2500 and
hence they attract a tax rate of 12%. Even though this is lower than the
previous taxation in several states in states where there was an absence of luxury
tax have seen a considerable increase on the tax to be paid. It was also
mentioned by the government that the government does not consider the discount
provided by the hotel aggregators which meant that the tax which is levied is
based on the actual price of the service and not the price paid by the
customer.

            Another major issue faced by the
company was tax collection at source (TCS). GST classified the online travel
aggregators as e-commerce operators which meant that they would have to deduct
tax collection at source. As the company had to work with multiple travel
aggregators they faced some difficulty on deciding on how TCS was supposed to
be levied.

            Despite these initial complications
faced Oyo rooms have been working hard and have adapted to the new GST regime.
The company has taken several steps to give a hassle free experience to its
customers and partners. Unlike several other travel aggregators who are
charging IGST Oyo rooms registered to GSTN in 28 states
across the country and are able to charge SGST thus providing a considerable
tax advantage. This can be seen as an advantage to the small and medium scale
enterprises when they need to make hotel arrangements for their employees.

            The company used its efficient
vendor network to its advantage by providing a single vendor registration
facility to its partners. Thus when a company is getting registered with Oyo
not only they get access to its comprehensive vendor network but also they need
not face the hassle of registering to new vendors in the future as the company
would take care of all its future bookings. This facility will encourage
several properties to partner with Oyo as it greatly simplifies bookkeeping.

x

Hi!
I'm Angelica!

Would you like to get a custom essay? How about receiving a customized one?

Check it out